<p>I would not transfer money to my parents and then just take it back after submitting the FAFSA. I would most likely not ask for any money back until after I am done with school. I don’t know if that makes a difference or not.</p>
<p>I am perfectly fine with gifting this money to my parents because like I said, I would keep enough to live off of. But at the same time, I know my parents would not have a problem gifting money back to me for whatever reason I give them. Can they really call that fraud when it’s just exchange of money between family members?</p>
<p>You should send an email to the FA dept of the school you will attend and ask the question. Be sure to identify yourself so they know how to get back to you.</p>
<p>Celeri – if it’s more than $13k your folks will have to pay tax on it at a min. of 17% while FAFSA would only count 20% of it for asset to begin with (if the regular student contribution is the same for independent – and it actually may be substantially less). So in essence, you would be compromising your own integrity as a taxpayer and citizen in order to net 3% (or, loose several percent as the case may be) – with substantially higher risks, including never ever being eligible for federal assistance again, and having any institutional assistance revoked. It is absolutely fraud, and it is the government in particular that you’re defrauding, particularly if you’re trying to get your EFC to Zero to become eligible for a PELL grant.
If that’s NOT what you’re trying to accomplish, why would you want “Financial Aid” via student loans through FAFSA at a min. of 5.6% interest when YOU HAVE CASH TO PAY. (Read Dave Ramsay.)
(Presumably you understand that the only real benefit to FAFSA EFC’s is the Pell grant, and that the rest of available funding is in essence a loan which may have preferable terms and forgiveness but generally not THAT competitive of an interest rate.)
It’s not as if they ask you to use the whole whack of your savings immediately. They ask you to contribute a PORTION. For parents, I think it’s about 5.6 % and for dependent students about 20% – but its possible that when you’re an independent the parent rule of 5.6% applies (not an expert in FA here – maybe someone who is can chime in.) If it were calculated at 5.6%, then you would be losing money to give it to your parents unless they’re in a very low income bracket.</p>
<p>^I’m not advocating that s/he transfer the money, but s/he could give 13,000 to each parent without incurring the gift tax, so 26,000 total.</p>
<p>This reminds me of the days when I was the youngest of a large family, and all my older sibs saved their money in my bank account so it wouldn’t show up on the financial aid filings. I wonder if I could sue them all to get that money back now, 40 years later?</p>
<p>mamabear beat me to it. Note it’s $13k a year per person. But if the OP can easily contemplate gifting that much, I’m wondering what schools she/he is interested in, and how much aid he/she anticipates. </p>
<p>And it seems like a real risk to me. Stuff happens. Without any kind of written agreement, the OP has no claim on the money once it leaves her/his hands. </p>
<p>We don’t know if the money was a gift from a parent or a relative, or if the OP earned it. If the OP is an independent and is working, I’d transfer as much as possible into an exempt retirement fund. That will stay in his/her name and won’t affect his EFC.</p>
<p>The recipient of a gift <em>never</em> pays taxes.</p>
<p>The giver <em>may</em> or <em>may not</em> pay any tax; most always they use up a portion of the unified gift tax credit. This may or may not increase the amount of estate tax you pay when you die in 50 or 60 years.</p>
<p>There is nothing fraudulent about the OP’s plan to gift money to his parents if it is truly a no-strings attached gift. It’s not any different than paying down all your bills or buying a new car or delaying income or whatever before filling out the FAFSA.</p>
Well, unless they draw up a contract or there is some other means by which the OP can legally force the parents to give it back, the “plan” doesn’t really have much meaning. The parents could blow it all in Vegas and the kid has no recourse.</p>
<p>Notrichenough - Thank you for the correction – clearly I’ve not given or received any gifts since I moved here. I had been ‘warned’ that it was not like Canada (where there is not limit or tax to gifts of any value for the giver or recipient) and that gifts could be taxed up to 45%. As a result of your comment I actually looked up the tax code, and see that the person meant IF over lifetime gift limit, it can be 41-45%.</p>
<p>So, that removes the negligible return aspect of my post.</p>
<p>To me, it is still a matter of integrity and a case of misrepresentation that would carry punitive outcomes, but that is solely the OPs judgment and threshold.</p>
Yes, they can, and it is, if the purpose of it is to increase the amount of financial aid you may or may not receive. They are not supporting you and you are not supporting them. (It’s different if you’re talking about dependents.) You would not be “exchanging” this money, but for an attempt to increase your financial aid. That is a definition of fraud.</p>
<p>Re #28. It also does not matter if the plan to return the funds is supported by a written contract. The agreement is oral and legally enforceable. The arrangement is: “I give you this money now, and in four years you agree to give it back, right? Right.” Felony financial aid fraud just became a federal conspiracy as well. Good luck with the “but it wasn’t in writing” defense.</p>
Are you a lawyer? You seem very confident that this is somehow felony fraud.</p>
<p>My understanding of contracts is that any contract with a duration of more than one year must be written to be enforceable. In this case it would not be legally enforceable.</p>
<p>But I’m not a lawyer, so what do I know.</p>
<p>I don’t see how this is much different than using my cash to pay down my mortgage, since equity is not counted. Or buy a retirement annuity, since retirement funds are not counted. Or whatever. If he says “I give you this money now so I get more financial aid”, and doesn’t say “but I expect it back”, I don’t see the (legal) crime, even if the parents say “we’ll give it back to you.” They would not be legally obligated.</p>
<p>Morally/ethically it might be a different story. Being morally outraged doesn’t make something a crime.</p>
<p>I am a lawyer, actually, and formerly with the US Dept. of Justice. That’s all I want to disclose about that. I assure you I know what I am talking about.</p>
<p>So, with a mind to legal and ethical considerations, perhaps the OP should purchase an annuity with the money.
However, you do have to (as I understand it) report money that you’ve contributed to a retirement instrument in the year it is earned, so if the OP is planning on immediately filing for FAFSA, then the idea does not work. The money put in the instrument would count in the roughly 30% of income above the baseline protection amount, right?</p>
<p>Maybe what’s more important to know is how much of the fluid cash would be protected under the asset protection formula (don’t know the amount). It’s possible all this plotting could be completely unnecessary.</p>
<p>Celeri,
The Finaid.org has a whole section on how to maximize your eligibility for financial aid. There is nothing wrong with using the strategies outlined in the section. People have been doing this for years and many people have hired professional people to help them achieve their goals. Is making large purchases with money in the bank prior to filing FAFSA considered fraud? Believe me, the taxpayers are not paying for your bills. Give me a break. Good luck to you. do what you feel is right for you.
[FinAid</a> | Financial Aid Applications | Maximizing Your Aid Eligibility](<a href=“http://www.finaid.org/fafsa/maximize.phtml]FinAid”>http://www.finaid.org/fafsa/maximize.phtml)</p>
<p>So scottaa, what is your take on the OP’s question? It is great to have an expert on board. Help us out. OP has a substantial bank account, wants to transfer the funds to a trusted relative, then put a trivial amount down for assets. The trusted relative has agreed to transfer the funds back any time OP requests. Is this Legit?</p>
<p>What if the OP withdrew all his assets in cash, put it in a briefcase, then handed the briefcase to his friend standing next him at the computer, then clicked Submit on the FAFSA online which has the change in his pockets for assets, then take the briefcase back. Would that be Legit?</p>
<p>Is there any difference at all from these scenarios and spending the funds down on needed purchases prior to FAFSA, something we all agree is Legit?</p>