<p>My son is going into 11th grade this fall. His dad passed away in 2008 and under the terms of the estate, the funds will be passing to an UTMA custodian to take care of the funds (can be done in any way as long as funds are in son's name) on my son's behalf until he turns 21. Since the funds, which will total about $150,000, will be available for his use, his assets look very substantial to colleges. Without his inheritance, he would not have any assets. He wanted to use some of the funds to pay for college, since that is what his dad intended, but he'd prefer to have some money left when he turns 21. Is there a way to both help pay for college, but preserve some so it will be available when he turns 21? I understand that assets held in life insurance, annuities, and retirement accounts would not count as his assets for college purposes. He has not worked, so he could not put any of the funds in a retirement account. As to an annuity, most the funds be kept there until age 591/2 or penalties accrue if funds distributed earlier? Also, since he's only 16, can one even open an annuity as a minor? Is life insurance an option? If so, what kind of life insurance would one recommend? We also thought of opening a 529 account, but this wouldn't work because he would only be the beneficiary, and these funds must stay in his name in order to legally transfer to him from the UTMA custodian. Sorry for the length of this, but we have been trying to figure out what would be best. Thanks for any input! PlanningNow</p>
<p>first, use fafsa4caster to figure out what your EFC will be. Not knowing the rest of your financials, you may find that you don’t qualify for aid with or without the inheritance. Find out what you EFC is with and without the inheritance.</p>
<p>Well, basically there is $150,000. in savings. You will probably have to do the same thing every other parent has to do with savings. We would all like to not use the money for college, get financial aid, and then give the money to our kids later. But just like us you will probably need to use it for college or he could take out loans and pay them off later. Or you could try a community college or state school and save the money.Same choices as everyone else</p>
<p>Hi Speedo, with the inheritance excluded, my EFC would be about 45,000 if colleges include my home equity, or $17,000 if colleges don’t include home equity in their calculations.</p>
<p>Money in a UTMA get whacked pretty hard by FAFSA, so I agree with the need to get things restructured. Is it possible/legal for him to become a part owner of the family home and “store” the money as equity in the home?</p>
<p>It is one of the weird aspects of the system that $10k of “UTMA” money is treated so much differently than $10k of 529 money.</p>
<p>Hi UT84321, for better or worse, the money can’t be used to pay off the home mortgage because the home is already fully paid off. Good idea, though.</p>
<p>I don’t think there is any way around using the money for college. With the mom’s EFC already so high, chances of being full pay at any stay school is high on that alone and unless the son could get into HYP or S Profile schools would just give loans and work study so not sure any financial gymnastics make sense anyway.</p>
<p>That must be difficult to lose a parent during the teen years.</p>
<p>So, the house is paid off, the child doesn’t work so he can’t make ROTH IRA contributions, he has $150,000 in an UTMA account but you can’t move it to a 529 - does he also receive substantial monthly social security payments (since 2008 and through age 18)? </p>
<p>It would appear as though he would have enough $$ to fully fund 4 years of college, depending on if he makes a modest choice, and have some money left over, so I don’t see a problem.</p>
<p>I’m sorry about your son’s loss. If the family home is fully paid off and there is $150,000 that was intended to be used for college, what is the problem? Who do you think should pay for your son’s college if not that money?</p>
<p>So it looks if your son goes public, you will be a full paying customer anyway. As for the privates, it’s more complicated. At some you may be a full payer, regardless and at others you may be eligible for aid. Depends on the policies of each college. If that money was readily available to your son, the privates would take a certain percentage each year towards tuition. However with your efc so high, I doubt you will get a whole lo t of aid outside of the top schools. If your son has the stats for a merit award that may be the way to go for financial savings.</p>
<p>I am assuming from your post that your son has access to the money for college payment purposes, if he does not have access until 21 then it is a more complicated matter.</p>
<p>If your son attends a public university in YOUR state, his cost per year will be about $25,000 or less per year. If he does that for four years, he will still have $50,000 left in the bank in the end and that doesn’t account for any interest the account accrue.</p>
<p>This is a way to both fund college AND have a “little left over” in the end.</p>
<p>There’s no real need to attend a school that costs $150,000 in four years. In fact, I’m positive that most colleges don’t cost anywhere near that amount of money, meaning that you can be full pay and still have tens of thousands of dollars left over. The in-state public suggestion is a good idea. You can probably be residential at your state flagship for that amount without coming close to exhausting that inheritance. </p>
<p>What you have to understand is that most people don’t get good financial aid even when they don’t have a lot of money. Apart from the Pell grant and a few state grants, most of what you get as financial aid takes the form of loans. If you have the means to pay for college without taking out federal loans, then you should do it. It might not seem like a lot, but graduating without any debt whatsoever (and having $50k in your bank account!) is a great liberty and a blessing.</p>
<p>^And if he can get secure merit aid to reduce the cost, he may have even more left over…not a bad way to start out as a debt free young professional!</p>
<p>I don’t understand why the OP doesn’t want to use the money to pay for college. It sounds like there is still some income coming in since the father’s death. The house is paid for. Many people would like to pay for their kids education and have 100,000 to give them when they graduate. However, that is not reality for most people. I’d like to go to a store and purchase $100 worth of items for $50 even though I have $150 in my pocket, but that’s not going to happen. Am I missing something here? Why shouldn’t this money be used for college?</p>
<p>You absolutely can transfer some of the funds to a 529 titled in your son’s name, even though he’s a minor. The title of the 529 account has to be the same as the title of the UTMA, which means the son owns the account, is the beneficiary, and typically has a parent as custodian. This kind of 529 is called a UTMA/529 or a custodial 529, as opposed to the more common parent-owned 529. The funds can only be used for the benefit of the son, in contrast to parent-owned 529s where the beneficiary can be changed by the custodian.</p>
<p>If your brokerage can’t do this, find one that can.</p>
<p>It should be noted that since the equity in the paid-off house bumps the EFC from $17K to $45K, that means the house (and your equity) is worth approx. $560,000. (IIRC - correct me if I’m wrong - CSS Profile assesses assets at 5% (after the various asset protection allowances). That’s what I assumed here.)</p>
<p>Yes, your son’s “assets look very substantial to colleges”. They ARE very substantial.
Your assets are substantial as well.</p>
<p>(it should be noted that many of the Profile schools now have a “cap” on how much home equity they assess when calculating the EFC – such as 1.5X, 2X or 3X annual income, IIRC (no time to find specific details right now).</p>
<p>on edit - note that FAFSA-only schools don’t consider home equity at all. But certainly sitting on $560K which you can borrow against puts you in a pretty darn strong financial position.</p>
<p>A quick question…to the mom…what is your income? Are you able to file a 1040A or 1040 EZ and is your income less than $50,000? If so, you MIGHT (note…MIGHT…someone else will have to comment) qualify for the simplified needs test…assets are not counted in the FAFSA EFC.</p>
<p>BUT for Profile schools this doesn’t apply. Assets are counted for the Profile.</p>
<p>But you know…there are only 300 or so schools that use the Profile and a couple thousand that do NOT use it. The schools that do not use the Profile or a school financial aid form…in other words FAFSA only…do not even ask about equity in your primary residence. </p>
<p>I am sorry for your family loss, but it sounds like your son’s college costs CAN be covered easily IF he is willing to attend a public university in your state.</p>
<p>I agree that with or without the inheritance you’re not likely to get aid anyway. Maybe at a few very elite very expensive schools, but if your son has the stats to get into those schools then he can likely get excellent merit aid at numerous great schools that offer it – including your state flagship univ. which may bring the costs WAY down even below the typical sticker price.</p>
<p>If he isn’t likely to get accepted to a HYPS type school, then you’re not likely to get any aid but loans in any case.</p>
<p>What a brilliant and wonderful thing for his father to have left him. He will be able to pay for college and have money left to start his independent life. Can’t beat that.</p>
<p>When you have the means to pay, it may be more important for your son to find the school that really works for him. In the long run, that may be a blessing and a good financial move.</p>