<p>I don’t believe you can start an IRA and deposit $70,000 into it in one year…and I don’t think it matters if it is an inheritance or not.</p>
<p>Your mom needs to discuss this with someone well versed in IRS code. There IS a limit on the amount of money one is able to contribute to an IRA each year. AND in every circumstance, it cannot be more than you earn in that year (at least that is my understanding). </p>
<p>Regardless…money contributed TO a qualifying retirement account IS added back in as income on the FAFSA (and Profile) for the tax year used for that FAFSA. In other words, if you are completing a 2010-2011 FAFSA, the tax year would be 2009. Any money put INTO the retirement account in 2009 would be added back in as INCOME for that year. The balance IN that account is not treated as an asset by FAFSA, but is asked for by some Profile schools…no one really is sure how that is used.</p>
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<p>What are you talking about? Do you want to know if there is a way to roll this over so it doesn’t show as money for the FAFSA…I do not think there is. Like I said…contributions to these retirement accounts are added in as income. If you are talking about avoiding paying taxes on this inheritance, I do not believe an inheritance IS counted as income on the taxes if it is below a certain amount and this would be. (check with a tax expert…I’m not one).</p>
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<p>This is NOT “quite an unusual circumstance”. MANY MANY folks receive inheritances each year. AND also, many of these same folks have kids entering college (think about grandparents who leave inheritances to their kids or grandkids). Many folks would prefer to “hide” this money somehow so that they can use it for something other than college tuition. This is NOT an unusual circumstance unless there is something else you haven’t put here. </p>
<p>The best way to find out about IRA restrictions is to call a tax expert. Re: the FAFSA, I’m pretty positive that any contribution to a retirement account will be added in as income for the year.</p>