@noncustparent: I like the idea in Post #15, paragraph #2 from @cptofthehouse.
How do you feel about that approach?
(Legally and formally lend the money to your child. After graduation, forgive the loan at the rate of $14k per year.)
Yes it is something to consider. But before going down that more complex path, I would like to know if the simple path is ok.
Simply gift to ex-wife, and that does not need to be reported on fafsa.
I can see that student 45i and and parent 94i are very similar, but if money is given to student, it should be declared in 45j (which I said I do for money from my 529 plan). But if money is given to custodial parent, there is no equivalent 94j. There is 94c (child support), but this would not be court ordered child support.
These 3 websites make it sound that grandparent gift to parent < 14k/year is not taxable and does not need to be reported on fafsa.
http://www.forbes.com/sites/baldwin/2013/02/28/grandparents-college-costs-and-529-plans/
http://www.usatoday.com/story/money/columnist/powell/2014/03/09/grandparents-college-tuition-retirement/5984735/
https://www.chelseagroton.com/Portals/0/Uploads/Documents/Investment-Services/How-Grandparents-can-help-with-College.pdf
same reasoning should apply to non-custodial gift to parent.
It’s important to understand that a giver of most gifts of more than $14k/year will not owe any actual tax. A gift tax return will be required, but for the vast majority of large gifts this is a reporting/accounting exercise only.
As noted earlier in the thread, gifts that exceed the annual exclusion amount (currently $14k) reduce the gift giver’s federal estate tax exemption, which for 2015 is $5.43 million. Only after that exemption is used up would you start paying tax on your gifts (or on your estate, after your death). If you think that the combined value of your estate plus the value of gifts that you give during your life that exceed the annual exclusion amount will be more than the estate tax exemption, or if you believe that congress may mess with the law (again) and reduce the estate tax exemption, then you might have reason to be worried. My guess is that most of those here on CC won’t have to worry about estates and non-excluded gifts that total more than $5.43 million. Worrying about what congress may do is a different matter.
midkidd posted: If you gift her money or pay her rent she is supposed to report it on FAFSA. I don’t disagree with the concept, but the OP asked where a gift to a parent or money paid for a parent’s expense is supposed to be reported on FAFSA. I looked and couldn’t see where. If the student was the recipient, this would be reported in question 45.j. Where would this be reported on FAFSA if the parent was the recipient?
You missed THIS part: “Then money would free up for her to pay something to son.” OP is NOT giving the money to his ex; he is indirectly giving it to his child. THAT is why it needs to be reported on the FAFSA. He is giving an orange and calling it an apple…
Same is true with the grand parent examples in the links provided above. How would it be any different?
Unless there is some kind of agreement for the ex-wife to turn around and give an equivalent gift to the child, OP is giving the money to the ex-wife. Granted, this whole arrangement that OP is hypothesizing probably won’t work unless there is at least some kind of implied agreement to do just this, which in my opinion raises ethical concerns.
The IRS knows what a gift is. It’s not a loan, it’s not an advance on your salary, it’s not a down payment on a purchase to be made later. The ex-wife here is free to use the OP’s money to fund their child’s college education, and is equally free to use it to buy a mink coat. That’s what makes it a gift.
Pastors should never read threads like these…
Do the same ethical concerns @MiddKid86 is referring to apply to when grandparents give gifts to parents? I would assume so. But for some reason, that is given a pass.
OP- you posted a provocative question on an open internet site. Now you can’t get huffy when a bunch of perfect strangers aren’t falling over you ready to declare you father of the year.
You should do whatever you want to do. Your money, your kid.
But once you start posting questions which imply in some way that you know you are cutting corners (either legally, ethically or both) you should be prepared for some pushback.
I think it’s fantastic when a grandparent wants to pay it forward to the next generation by helping with college costs. It’s also great when a parent does it with their child- but less noteworthy, since in general, most people believe that parents are wired to try and help their kids get educated and launched to the best of their ability.
In your case, there seems to be a subtext going on that you’d like to help your child but have some other motives in mind as well.
In which case none of us can help you. Give your ex-wife the money and then it’s on her to decide what to do with it, how to account for it/list it, etc. OR- write your kid a check and then do the same. You can control what you do with your money, but you can’t control what happens once you’ve given it.
Sure, if it’s done with an understanding that there will be a quid pro quo that benefits the student, all for the purpose of subverting the FAFSA process. Who is giving it a pass?
Who is giving it a pass?
The college financial advice columns of reputable media such as Forbes and USA Today, that I posted in #22.
@blossom, I may be perceived as getting huffy, but I am not getting huffy at all.
I am being incisive in my questioning, because I want to make sure there is nothing I am proposing to do that is wrong. If there is something wrong, I would like someone to unearth it, so that I do not do it.
But until now I don’t feel anybody has provided me info that makes it wrong. Only that it may be perceived to not be ethical, and even that is up to debate.
Is the idea in Post #15, paragraph #2 from @cptofthehouse, any more ethical? And what about paying bills in advance to reduce assets? Where is the line drawn?
How old is the student if “child support” is long gone?
Child support doesn’t have to be “court ordered” to be considered “child support” on FAFSA.
People give money to their ex spouses all the time for the support of their children. It doesn’t have to be court ordered and in fact people increase their support without going back to court because they know the court will increase it if petitioned and it is cheaper to not go to court.
FAFSA defines this as child support and requires it to be included on the parental income disclosures. Court ordered or not. You are saying that this is a gift to your ex, not in support of your son so it is not child support. Okay.
It is up to your ex to support that argument should if ever be questioned. Will it? I doubt it very much, just like her making money babysitting or having money in a savings account she doesn’t list would be discovered. There are some on this list who think every dime should be listed as an asset, including the jar of quarters in your dresser, the gift cards you got for Christmas, half the savings accounts for younger children held jointly by the parent. It is very unlikely these things are ever going to be discovered, so it is up to you to report them or not. Well, really it is up to your ex wife.
Why are grandparent gifts different? They just are. They are certainly more rare than a parent supporting his own child.
I am so glad I’ve been following this thread just in case hell freezes over and D’s bio Dad decides to throw us a bone lol. At least I’ll know what to do with it. Buy myself a mink coat of course 
@mom2collegekids, child support long gone, because I paid the last couple of cs payments ahead of time, to feel free earlier.
Interesting thing on fafsa:
93b. Child support paid because of divorce or separation or as a result of a legal requirement.
94c. Child support received for any of your parents’ children
If custodial parent happens to pay child support, then they specifically mention a legal requirement, but if she/he receives child support, nothing is said specifically. FAFSA cannot have it both ways.
@NEPatsGirl, that is not lost on me. One of the reasons I might not do this, is because I am not totally comfortable with what might be done with the “gift”.
Thanks everyone for the advice, even the ones that disagree with me.
The reason the FAFSA cares if the custodial parent is taking a ‘credit’ of the FAFSA for paying child support that must be court ordered or legally required is that if that money is voluntarily given, that money should be available for the custodial child’s education. The paying parent could be paying out a lot of money ''voluntarily" so that the money reported on FAFSA is less. It’s the same as the contribution to a 401k; it’s not that contributing is a bad thing, it is just that it’s a voluntary spending of the money. For funds being received by the FAFSA-filing custodial parent, that same distinction doesn’t apply - money received is money received, and FAFSA doesn’t care if it was required to be paid or voluntarily paid, it is still money received in support of the child.
The whole question comes down to what the definition of child support is. If the divorce decree and settlement says that your child support is $X per year, and you pay a lot more than that because you want to do so–so kid can go to a class trip, do some activity, buy something pricey, that the mom can’t or won’t do, that is still child support. So, yes, if you give your ex a check and stipulate it as going towards your son’s college costs or anything for your son, whether official child support requirements are done, doesn’t make any difference. It’s still child support is what the fin aid officers are likely to say, IMO. But you can give your ex money with no strings attached and then it’s not. So intent becomes part of the process if it comes down to an audit and verification, and whether you and/or your ex are willing to lie if it comes down to it.
As for the loan, many families do business that way. It’s a loan . If the kid takes the money and blows it or flunks out of school due to misbehavior or any number of things, it may well remain a loan. Such laons are given for any number of reasons. My husband’s grandmother lent her son, large amounts of money, and he paid the interest and made whatever other terms of the loan right up until she died, when the loan was forgiven, but taken out of his share of the estate. People do this loan thing even without financial aid in the picture because there are other advantages to the arrangement. I don’t know too many people who just happen to give their exes an amount of money that happens to be the amount needed for college for the kid, and say the ex could do what she wishes with the money. That doesn’t smell right at all. Give a loan with the stipulation it’s to be used for college and repaid with certain terms, that’s a whole other story, especially when it’s written up to meet legal requirements. Can’t argue with that one.