Sibling's bank account and financial aid

<p>My oldest DD is a college senior this year. She worked hard at a lucrative internship this summer and plans to work as much as possible throughout the upcoming year. She still has most of summer earnings because she wants to pay off some of her loans upon graduation. She will not be applying for FA since she'll be graduating. So, will this (her savings account) need to be reported on her brother's PROFILE since her money has nothing to do with him or us? We may currently be a secondary on her account - although the tax info is hers. I'm thinking I could always show her tax return to prove she earned those savings and it's not OUR money.</p>

<p>You are supposed to report all siblings financial accounts. And, yes, it is taken into consideration for financial aid. So if you have one kid with a huge bank account for some reason, it can be an issue. Rule is in effect so parents can't "hide" college savings in siblings' accounts.</p>

<p>But where do you report it? I can't see a question on either the Profile or the FAFSA that asks for it. The closest thing I could find is the question I quoted about entering parents' assets held in a minor student's name, but nothing about a sibling's individual assets... like my daughter's babysitting money, for example. Could you cite the actual question on the Profile or FAFSA form?</p>

<p>Like 'rentof2, I've never seen a question on either FA form that asks for the assets of a sibling. If there is one, I'd like to know about it too.</p>

<p>From the Profile Application Instructions for 2008:</p>

<p>
[quote]

PA-105. Include funds in custodial accounts, Uniform Gifts to Minors accounts, or other savings and investment accounts held in the names of your brothers and sisters who are under age 19 and not enrolled in college. Section 529 college savings or prepaid tuition plans are parent assets and as such should be reported as parent-owned investments in PA-120.</p>

<p>PA-120. If your parents have investments, use the worksheet to determine how much those investments are worth today. Don’t include savings given in PA-100 or assets reported in PA-105. Include funds held in Section 529 prepaid tuition or college savings plans or Coverdell savings accounts established for you and your brothers and sisters. These should not be reported as a student asset in Section SA. If assets held in Coverdell savings accounts are included, note this and the amount in the student’s account in Section ES.

[/quote]
</p>

<p><a href="http://edisk.fandm.edu/sad/Profile_Instructions_0708.pdf%5B/url%5D"&gt;http://edisk.fandm.edu/sad/Profile_Instructions_0708.pdf&lt;/a&gt;&lt;/p>

<p>You DO report accounts held by the parents that are FOR the students (see post 25). If your siblings have a regular savings account with money in it, I do not believe there is a place to report it on the FAFSA. If your siblings are in college, you don't report anything. If your siblings are no longer dependents, you don't report anything. If your siblings are over 19 you don't report anything.</p>

<p>I guess the question here is...if your 16 year old sister has a bank account with $100,000 in it, do you have to report it on the FAFSA or Profile. FAFSA..well, I can't see where that would happen. PROFILE..hmm...seems grey to me...</p>

<p>Not in FAFSA, but on PROFILE, yes. In a complete audit,they catch it. Call an FA office that uses PROFILE. As Vballmom quoted, it goes on PA-105.</p>

<p>But PA105 says "Enter the total value of parents' assets held in the names of the student's brothers and sisters who are under age 19 and not college students." How does a 16 year sibling's account become a "parents asset"? This goes back to the beginning of this thread. If a bank requires a parent to have their name as secondary on a minor's bank account (even a minor's account that only contains the minor's own income), does that make that account a "parent asset"? This is not addressed directly anywhere that has been pointed out so far in this thread. Is something an asset simply because you could, if you wanted to, get your hands on it? Can a minor really <em>own</em> anything? I mean, do they have property rights? If my 16 year owned a car and I wanted to take it away from them, could I as their parent do so? I expect actual property rights for minors are pretty limited, if they exist at all. Does anyone know anything about that?</p>

<p>Minors do have rights. If you open an account for a minor, unless you are on the account, you cannot take money from it. You cannot take a check made out to a minor for your own. </p>

<p>The reason for the rule of reporting sibling assets is so that you don't shift assets from your oldest kid going to college to your youngest still in school. Check it out with your college FA office.</p>

<p>I don't believe minors can even open an account without a parent or guardian's name on it. Have you had a different experience with this?</p>

<p>I understand the <em>reason</em>, but the question remains unanswered, is a minor sibling's bank account (where the parent is, as required, a secondary) automatically considered a parent asset?</p>

<p>I mean, is the answer to this in writing anywhere as it pertains to FAFSA or Profile?</p>

<p>This is really a theoretical question for me, so not worth bothering my son's college's FA office with. My daughter, although a minor, will be a college student this fall so the point is moot according the instructions for answering PA105 on the Profile. I am just interested in the confusion it creates.</p>

<p>I am carefully following this thread since we will be filling out these forms for the first time in January. Although we are certainly not trying to hide anything, our younger daughter does have more money than our senior son by virtue of teenage expenses (car etc). In looking at the account she is listed first, my husband is listed as custodian, the 1099 comes in her name and she has not had to pay taxes (due to the amount). In my mind (not tax or financially based), this is not a parental asset because we are not paying taxes on it since the 1099 is in her name. I would certainly never ask a 12 year old to contribute her baby-sitting money and such to her brother for college. This is more complicated than I imagined.</p>

<p>I think the instructions on PA 105 are pretty unambiguous: if a sibling under 19 and not in college has money in a bank account, it needs to be reported, whether it's $500 or $100,000.</p>

<p>For their own protection, minors (under 19 in most states) are legally barred from entering into certain kinds of contracts, including opening and managing bank accounts. An adult, typically a parent, needs to do it for them. State laws provide for this; the account is called a "custodial account" or in some states a Uniform Gifts to Minors Account (UGMA) or a Uniform Transfers to Minors Account (UTMA). The adult on the account is legally responsible for managing the account on behalf of the minor child (although the child also may be given rights to withdraw from and deposit to the account once it's created). The money in the account is legally the child's; the adult can't just take it and use it for any purpose the adult wishes. And legally, the money in a custodial, UGMA, or UTMA account transfers to the full control of the child upon reaching the age of majority (usually 19)---not a darned thing the adult can do about it, which is one of the big disadvantages of this kind of account from the parent's point of view. </p>

<p>But for certain purposes, the money in the account can also be deemed a parental asset. For example, if the money in the kid's account is earning a lot of interest, that interest will be taxable to the parent at the parent's (not the child's) marginal tax rate, above certain very low thresholds (I believe the first $850 non-taxable, next $850 taxable at child's rate, anything above that taxable at parent's rate).</p>

<p>PROFILE wants to know what's in those accounts, because it's relevant to determining the family's true financial situation. (Parents, after all, have a legal obligation to support their minor children; if the minor children are independently wealthy, at a minimum that means the parents are substantially better off than most other parents whose children aren't independently wealthy). That doesn't mean these assets will be treated the same as other parental assets; that's for the individual school to determine, but my guess is if it's just a few hundred or a few thousand dollars, most schools would just ignore it. If it's $100,000, it will raise some eyebrows. It may raise questions as to whether the younger sibling's fat bank account is an attempt by the parents to shield assets by "parking" them in a minor child's account. And even if it's not--if, say, it represents earnings by a younger sibling who's a handsomely paid child actor---it does materially affect the parent's financial situation, and colleges may take it into account in calculating FA. If you don't report it and a large custodial account is uncovered in an audit, it could be trouble.</p>

<p>"I think the instructions on PA 105 are pretty unambiguous: if a sibling under 19 and not in college has money in a bank account, it needs to be reported, whether it's $500 or $100,000."</p>

<p>I think the ambiguous part is the part you left out that asks for "parents' assets" that are held in a sibling's account.</p>

<p>That is ambiguous, and I bet most people would read that to <em>not</em> include younger daughter's small savings account fed by her babysitting money. I'm not saying whether it should or shouldn't be reported, just saying most people wouldn't look at that as a "parents' asset."</p>

<p>I also wonder why parents of a minor sibling who <em>is</em> in college would be exempt from reporting that sibling's account balance. Not arguing, just wondering what the rationale is behind that exemption.</p>

<p>^^ I don't have the Profile form itself which is available only from College Board after you register. I take it that's where you're quoting the language that says "Enter the total value of parents' assets held in the names of the students' brothers and sisters who are under age 19 and not college students." </p>

<p>I agree, that part's ambiguous. That's why they have instructions, to clarify exactly what they're asking for on the form. I'd say the instructions are controlling and unambiguous. It works just like a tax form; you don't get to claim you don't know what they're asking for on a 1040 when there are 1040 instructions that explain unambiguously what the (admittedly sometimes ambiguous) language on the 1040 itself means.</p>

<p>That's not to say everyone gets it right, or that the language on the form couldn't be improved. </p>

<p>^ I assume the rationale for excluding the bank account of a minor sibling who is in college is that those funds are going to be tapped for the sibling's college expenses, and to that extent are already "spoken for"; the sibling's college will go after those funds to the tune of approximately 100% in calculating the sibling's EFC. Also, some loans and scholarships are paid out in lump sums and could end up sitting in sibling collegian's account, temporarily as it were, during a period that could coincide with the FA applicant's filing date of the Profile. That could become very misleading. Still, you have a point; a minor sibling's funds are relevant to determining the true financial condition of the parents/family, whether or not the minor sibling is in college.</p>

<p>Okay, I found the answer... I think. As bclintonk suggested I found the CSS Profile instructions for 2008-09 for the question PA-105. Complete text as follows:</p>

<p>"PA-105. Include funds in custodial accounts, Uniform Gifts to Minors accounts, or other savings and investment accounts held in the names of your brothers and sisters who are under age 19 and not enrolled in college. Section 529 college savings or prepaid tuition plans are parent assets and as such should be reported as parent-owned investments in PA-120. You should only include assets your parents own in your siblings' names, not assets owned by your siblings."</p>

<p>Okay, so I'm going to understand that to mean that younger sib "owns" the babysitting or lawn mowing money they are saving in their bank account, even if the bank requires a parent to also have their name on that account, and that the funds do not have to be reported in PA-105 of the CSS Profile.</p>

<p>^ Suit yourself. I don't think that's what it says. Younger sib's bank account is a "custodial account . . . held in the names of your brothers and sisters who are under the age 19 and not enrolled in college." It fits that definition whether the money in the account was earned by younger sib for work performed, found in the ditch, or a gift or transfer from parents, grandparents, or any other person. In any case, regardless of the source, younger sib "owns" it if it's in a custodial account. Even if it was a gift or transfer from the parents, it's legally no longer the parents' money; it belongs to younger sib, but if younger sib is a minor, the parents have the right and the duty to manage it on younger sib's behalf. That's what makes it a "custodial account." I'll repeat one last time: I don't think this is even remotely ambiguous. The instructions are clear.</p>

<p>We always reported all the siblings savings/checking accounts - not 100% if that was right or wrong at the time but we didn't want to take a chance. Now, it seems perhaps we reported more than we had to for the past 2 years.</p>

<p>From the above posts, I think we no longer have to report the older (21) sister's account on her brother's FA . Although she will be graduating in May, as of the FAFSA/Profile filing date in '09, she will still be a college student - but she will be 22 at that point. Does that sound right? </p>

<p>If being 19 or older excludes her from being reported on her younger sibling's FA, then I guess we didn't need to include her info on her brother's FAFSA/Profile in '07 and '08. But we were right to include the info on her own FAFSA/Profile in those years and include HIS account as he was under 19. It probably didn't matter much since she didn't have all that much in her accounts ( but stupidly I gave her food money for the semester BEFORE doing FA - I should have waited until the following day).</p>

<p>But, bclintonk, then what would consititute an asset owned by a sibling that does not need reporting, as per the last line in the instructions? It would seem odd for it to refer to anything other than accounts of one kind or another given the context of the question... like say the younger sib's bicycle or something like that.</p>

<p>^ Oh, I see, I missed that line because I was looking at the 2007-08 instructions. Good point. That language about not including "assets owned by your siblings" is in the 2008-09 instructions? Because it wasn't in the 2007-08 instructions quoted in post #25, taken directly from the .pdf document linked in that post. </p>

<p>Now it truly is unclear. It's especially unclear because as a legal matter I think it's just an untenable distinction. If it's in a bank account or investment account in the kid's name, then the kid is the "owner"; the parent is just the custodian. It doesn't matter whether the kid earned it or it was a gift from the parents or someone else; the kid "owns" it. Perhaps they now are trying to draw some common-sense distinction like the one you suggest: if the kid earned it don't report it, but if the money came from the parents, report it because it's an "asset owned by the parents in your siblings name." But legally that makes no sense because if you gift the money to your child, it's the child's money, not yours, same as if she had earned it. So if PA 105 doesn't apply to ALL custodial accounts, it's hard for me to see how it could apply to ANY of them. Very confusing. I think they may have shot themselves in the foot by adding this additional language,</p>