<p>My daughter has a friend that is seeking advice. I am hoping all the wonderful people on CC will either be able to give me some answers for her or at least help lead her to someone that has the right answers. I apologize in advance for the long history before the question but felt it was necessary to give as much information as possible to get the best advice for this young lady. I also apologize in advance for using any incorrect lawyer lingo but I'm working on the story the student has given me.</p>
<p>This student is currently a freshman attending Texas A&M with a financial aid package made up of almost all grants (pell) and a couple small hometown type scholarships and no student loans. Her first year is about 90% covered through her financial aid and she is working about 20 hours a week to make up the few thousand not covered. She also has a twin sister attending a community college in the same town that also has a small financial aid package. </p>
<p>This student's mother died three years ago. The girls will receive some inheritance. I don't know the exact amount but it will be about $20-25,000. She doesn't know the exact amount because it has been held in the estate. The mother didn't have a will. The estate is being handled by a lawyer. </p>
<p>The money is about to become available. This student wanted it to go into some type of trust so she could use it for a physical therapy school when she completes her BS degree. However, her sister wants some money...now. Her grandfather has told her that if the sister takes out money, she will have to take out the same amount.</p>
<p>Another piece of information that you might need is that she does have a living parent (father) which I guess means she is a dependent and not an independent which affects her assets as a student. However, the state removed her from her mother's home and gave full custody to the dad when they were in their early teens. However, they only stayed there a short time before moving in with another family. I don't know if that means a foster family or what. I don't know if the dad claims her on his income taxes and I don't know if he gives her any financial support. Sorry I don't know this and I don't know if it is important.</p>
<p>She doesn't want the money right now because she is worried it will mess up her current financial aid. She had planned on using the money to go toward paying for PT school. So, here are my questions:
1. How will it affect her financial aid if it is taken out now?
2. Does it really matter if she uses it now or later?
3. If she does use it now, will she be able to get financial aid for PT school?
4. If she must take the money now and wants to save it for later, what should she do with it...CD, 529?</p>
<p>Thanks in advance for any advice and guidance you can give me. This is a really great kid that is working hard. She is trying to have a game plan for financing her education.</p>
<p>Unfortunately, Whether or not the money goes into a trust it’s an asset she needs to report. College will count it either way as it’s deemed you can borrow against a trust. In fact, I think a mistake was made in not reporting it originally.</p>
<p>It would be great if she could decide when to spend it but colleges have other ideas. She’ll probably have to borrow for PT school.</p>
<p>This is a complicated situation. It is hard to give advice without knowing all the facts. </p>
<p>It is true that as an asset it does not matter if it is in a trust or if she takes it out of the trust. It is still a reportable asset for FA purposes. However the impact it will have would depend on various things.</p>
<p>First thing you would need to determine is, is she a dependent or independent? With her not having lived with her dad and possibly in foster homes, this is an important question. If she was a ward of the court at any time (after age 13 I think) or in the foster system, then she is independent. When she filed FAFSA last time did she report her dad’s income or not? She must know the answer to that. If she was able to file without him and get the Pell then she must be independent. The answers to your questions will vary a lot based on whether she is independent or dependent.</p>
<p>Being a dependent or independent for FAFSA does not really affect the treatment of assets. Even independent students do not have asset protection until they are about 25. However if she is independent and does not have to file a tax return, or earns under $50,000 and is able to file a 1040a or 1040ez she may be eligible for the simplified needs test where her assets would be ignored. If she is a dependent then her parent is the one who would have to meet the criteria (income and one of the other criteria - eligible to file a 1040a or ez, dislocated worker, qualify for means tested benefit such as free lunches) in order for her to qualify.</p>
<p>If she does not qualify for simplified needs then the assets would have a 20% impact on her aid. If she is a dependent and puts the assets in a 529 account they would be counted as parent assets (even though they would be hers) and have only up to a 5.6% impact. if that. (depends on what other assets Dad has).</p>
<p>The other issue is the income issue. Once she receives the money it is income in that year. Again the impact will depend on whether she is dependent or independent. A dependent student has less income protection than an independent student. </p>
<p>So, as you can see, it really is impossible to give good advice without knowing all the facts.</p>
From the original post it sounds like the money was still part of the mother’s estate had not been disbursed. If that is the case it was not a reportable asset at that point (though if it was in a trust in the girls name it would be). Depends on the exact situation.</p>
<p>@2college2college
The first piece of advice I gave her was to go to the financial aid office on campus to ask them for guidance. She is not trying to be dishonest and not report the money. She only recently found out that she might receive the money. It was not in a trust. The mother’s money is being held in the estate to pay off the debt from the business she owned, taxes that had not been paid as well as other reasons and there was no will. I just know the lawyer didn’t even know if they would get any money due to other financial obligations that came first. She is trying to do the honest thing as well as the right thing to help her pay for her education now and in the future.</p>
<p>^Why do you say that? If she’s going for a DPT she’ll have several years of grad level tuition to pay with very little FA!</p>
<p>If she’s a dependent for FAFSA purposes, can/did her dad meet the criteria for the simplified EFC formula? As swimcatsmom said, this would exclude assets from the EFC calculation. Other than that, her best chance to preserve at least some of her grant aid would be to put her inheritance into a 529 account. Do you know what the timing of this settlement will be? Since it’s so close to the end of the year, she may want to convince her sister to just leave it in the estate for now until they can file FAFSA again…hopefully in January.</p>