<p>I'm high school senior right now and plan on attending college next fall. When my dad passed away more than ten years ago, he had life insurance so I will come into a sum of money when I turn 18 this December. The problem is what to do with this money, because it was directly left to me so it will be counted in the financial aid process as a personal asset and it's a decent amount (between 100-200k). </p>
<p>I've researched a little bit into where assets can be stored so they do not count on the FAFSA, such as in life insurances and annuities. My mom is currently unemployed right now, and I believe for the entire past year, so our EFC would otherwise be really low. I don't want to have to spend most of this money in the next four years just for college. I know that it's better than not being able to afford school, but it still sucks. </p>
<p>Does anyone have any advice please? Should I look more into putting it into a life insurance or annuity asap? PM if needed.</p>
<p>If you qualify for one of the simplified EFC formulas then you won’t see asset questions when you file FAFSA. Your state may require asset reporting for their programs though. Student 529 plans (college saving plans) are treated as parental assets for FAFSA. Parent assets are only assessed at 5.6%.</p>
<p>Well I guess the problem is with the CSS profile and most private colleges use that. And I believe it’s too late for me to start a student 529 plan? This asset will definitely me counted as my own, so I need to find the most efficient place to put it so that it will not count for too much, or anything if possible, on the CSS</p>
<p>You can basically pay for four years at just about any college in the country with that money. While the situation which led to you having the money most definitely sucks, you should consider it as a wonderful legacy from your father, that your college education is paid for.</p>
<p>There isn’t any way to pretend you don’t have the money - because you do.</p>
<p>You can open a student 529 at any time, including the day you turn 18 and inherit the money. Just be aware that the money must be used for qualified higher education expenses. Any money that’s later withdrawn that’s not for qualified higher education expenses will be subject to a 10% penalty on the gain. If you put $200K into a 529, use $100K for college and have a gain of $20K gain over the life of the account, your penalty would be 10% of the $20K, or $2000. Plus you’ll pay capital gains taxes on the $20K gain. You can choose to move all of your money into the 529, just plan ahead for the taxes and penalty, if any.</p>
<p>Assuming you’re planning to go to college anyway, investing in an age-based 529 is not a bad idea. Look for one with low fees - it doesn’t have to be the one that’s sponsored by your state.</p>
<p>I would guess a Roth IRA. IF you invest the total sum into a Roth. BY the time your reach 60. You will be a millionaire several times over! The money grows tax free!</p>
<p>Not sure how that would effect the FASFA. thought, but this is what i would do. You would never have to stress about retirement.</p>
<p>you can open a 529 and put it there. be sure you title it properly so it counts as a parent asset (check you fafsa/css school info). you can’t use an Roth as you can only contribute a couple thousand a year; in addition to the issue vballmom points out. I asked a similar question pertaining to tax deferred annuities - stay close and let’s see if that is an option.</p>
<p>As far as who owns the 529, it will be the student. However in some states you must be 21 to directly own a financial instrument. If the student is in one of those states, he must have a custodian for the 529. That would be his mother, with the 529 titled in the name of the student. If he’s in a state where the age of majority is 18, then he won’t need a custodian and can open the 529 directly in his own name. In both cases it’s a student-owned 529, not a parent-owned one since the funds originated from the student.</p>
<p>From what I know, the 529 can only be used for higher education right? So yes, I am 100% sure I’ll be attending college next fall and will probably have to use some of the money. But my main issue is that I don’t want to use it ALL towards school, and have it be stuck in the account, thus I want to be able to stick it somewhere that I can access, perhaps over time (such as with annuity.) Idk there must be something =/ thank you vballmom for all your help nonetheless. Doctorzzz I will definitely be checking your thread whenever I check mine</p>
<p>Annuities and whole-life insurance policies are tricky financial instruments. Yes, they might let you shelter some of this money from the financial aid process, but doing so will come at some kind of cost to you. You need to talk the various ramifications over with more than one expert so that you understand what you are getting into. One place to start would be the financial entity that currently holds your funds.</p>
<p>Your choice of college will affect how much of this money might be spent on your education. To be perfectly honest, having access to this money could make a big difference in your options! If your mother is unemployed, and you would otherwise have a 0 EFC, your options could be limited to commuting to your local community college because that would be all you could afford with a Pell Grant and a Stafford Loan. </p>
<p>Take a look at the various threads here on merit-based aid, and see if you find anything that could work for you. Talk with your guidance counselor about where students with your profile have been admitted in recent years. If you look around, you should be able to come up with a list of places where you can get a good education, and even if you are full-pay where you will still graduate with some change in your pockets.</p>
<p>I’m sorry for the loss of your dad. As others have noted, he left you with a wonderful gift. </p>
<p>If you really want to have money left at the end of the day, choose a less expensive college or one where you will garner significant merit aid. It is very possible that you will then have extra money left at the end of college as well as being able to pay for college itself.</p>
<p>"To be perfectly honest, having access to this money could make a big difference in your options! If your mother is unemployed, and you would otherwise have a 0 EFC, your options could be limited to commuting to your local community college because that would be all you could afford with a Pell Grant and a Stafford Loan. " </p>
<p>I’m not sure I understand this. It’s my understanding that if my EFC is low, then a private university that say meets 90% of expressed need, will offer that need in a financial aid package? I don’t think what you’re saying will be a issue, meaning I don’t think my only option will be a community college. But maybe I understood you incorrectly =/ </p>
<p>Thank you everyone for expressing your condolences. I am very grateful I have this opportunity to attend college without accumulating much debt. I think my final decision will be to put half of it in a life insurance policy and the other in an annuity.</p>
<p>What the previous poster meant was that this money will open other doors for you and give you options that you may not have had. Schools can meet need by offering loans but many schools expect much more that the EFC will come from the family/student. If your goal is to conserve your principal, make sure you also apply to schools that are affordable - whether that means applying to instate publics or those that are likely to offer you merit aid.</p>
<p>Please do some research so that you completely understand what buying a life insurance policy and buying an annuity really mean. You might find that a life insurance policy on an 18-year-old will be very cheap, not to mention that it makes no sense. Annuities are very complex financial instruments; the money you think you’re saving on FAFSA might be cancelled out by the cost of the annuity. Do you have someone you trust to guide you through these decisions?</p>
<p>sk8rmom ohh yeah I understand now. I guess I was just looking at best case scenario. How much merit scholarship I am offered will definitely play a huge role in which school I choose. Thanks! </p>
<p>vballmom yes I’ve been researching the two options with my mom and a financial planner. I believe the annuity lets me withdraw a certain amount each year, and while I’m not earning much interest, I will get my principle back in full in a few years. Thank you for the concern</p>
