My husband is the beneficiary of an irrevocable trust but is NOT the trustee. He has no control over the trust and can’t take money out unless the trustee gives it to him. We understand that we have to report the trust assets on the FAFSA and the CSS Profile. The trust owns a small business which would be excluded on FAFSA under the small business exclusion. We are wondering how we report the business. Would we include it under investments assets or as a small business? Obviously, we would like to consider it a small business so we don’t have to report it on the FAFSA, but it will still be reported on the CSS profile. On the profile does it matter if it is an investment asset or a business? Do schools look at both of those equally? I am not asking about the income from the trust because we know what to do with that. I am only asking about the assets. Thank you.
Besides his status as the trust beneficiary, what role, if any, does your husband play in the operation of the small business that the trust owns? Is he an officer of the business (president, CEO, etc.), or does he in any way have control over how the business is run?
@BelknapPoint , my husband runs the business. He is the only employee. But, the trust owns the business.
Hmmm… tough call. Without knowing all the particulars, including the terms of the trust, it’s hard to provide meaningful assistance. Since the business is owned by the trust and your husband is the beneficiary but not the trustee, that supports the argument that the trust (including the value of the business it holds) should be reported as an asset. However, since your husband runs the company and is its only employee, that supports the opposite argument.
The small business owners that I have talked to have nearly all sent their children to in-state public universities. This also applies to some small landlords (with relatively modest properties – at least the ones who don’t have a spouse with a high income), and farmers (ditto regarding spouse).
There appear to be two issues:
One issue is that the way that “need” is computed counts both the assets in the small business, and also counts the income from the small business. However, the small business owner can’t both sell the small business to get access to the assets, and also still benefit from the income from the small business.
The other issue is that the vast majority of small business owners don’t want to sell their small business, don’t want to lose control by giving up partial ownership to others, and in many cases have no idea what they would do if they had to sell their small business.
A very similar problem can occur for retired parents who don’t have any pension and who have substantial retirement assets which are not in official retirement funds.
As such, for expensive private schools that claim to meet full need, in your case (and other similar cases) to me it appears that they probably just plain don’t meet full need.
From a diversity point of view I think that this is a big problem – assuming that “diversity in experiences, ideas, and viewpoints” counts as a form of diversity.
@BelknapPoint , exactly. We keep looking at from both sides. But we also know we will have to report it. We are just trying to figure out which way is right. Maybe there is not right or wrong as long as we report it as something.
Presumably he receives a W-2 from the business, as an employee? All of his income from the business would be in wages or salary?
I would think that the business is not separate from the trust – you would lump the business assets in with whatever other assets the trust might hold, and report that all as the value of the trust.
Just my preliminary thought…