<p>My D will be a senior this year and is applying to pharmacy schools in NY & PA. We expected she might be Pell and ACG eligible as I'm a single parent and have worked in a lower paying, highly flexible job for eight years while taking care of my 2 kids and my chronically ill mother, earning only around $25K/year. D's got a very good GPA but we didn't expect that she would get a free ride through any pharm school so I've managed to save about $8,000 in a 529 plan to help her out a little, am willing to take on some debt for her, but otherwise only have my home and retirement savings as significant assets. </p>
<p>Anyway, my mom passed away unexpectedly a month ago and now her house, which she'd deeded to me and my sister a few years ago with life use, will be listed as an asset on Fafsa. The house needs some significant work but is probably worth around $60K "as is". Can I use the assessed value, which is $65,000, but it's been some years since the last reassessment? Or do I need to obtain a current appraisal to verify that before I "guesstimate" on the Fafsa? I'll also inherit about $20K in stocks and annuities but will need to borrow or invest about $10K for my share in repairing her house in order to sell it. Meanwhile, we're renting the house to a relative, which will cover taxes, insurance and expenses. I know none of this will be reflected on my tax return but is the extra $50K in assets suddenly going to kill my daughter's financial aid? Do assets in any way affect Pell eliglibility? I have some options/decisions to make, such as leaving a tax deferred annuity in my mom's name; transferring some of the stocks to my Roth,etc. not to mention settling her affairs, and I'm feeling uneasy, like there are factors I might not be considering! I suppose I could also just sign the house over to my sister, but she's a busy pediatrician and is counting on me to deal with the estate and the renovations. I also have three other siblings who are upset that the house was deeded separately from the will and nevertheless expect us to share the proceeds when it's sold. Can I therefore divide the value by 5 or is legal ownership the determining factor?</p>
<p>I got half way through reading your post and stopped, because a few things popped into my mind.</p>
<p>I’m not an aid or FAFSA law expert, but I do know that you can talk to aid offices. The thing that I have heard again and again when there is more going on than the FAFSA shows - talk to the aid offices. </p>
<p>You could e mail this question to one of the offices. And even if you end up having to put all of these new assets on the FAFSA, especially the house that needs to be fixed up, you may (M A Y) be able to talk to the aid offices about the situation, showing them that this house (and the asset value of it) are unexpected and newly acquired, and you are basically fixing it up so that it can be sold. Because of this, at the moment that money is inaccessible, but next year (say you have it fixed by then, and sellable, etc) the capital from it would be readily available. </p>
<p>Basically, saying that the extra assets from this house paint an unrealistic picture (at this time) of more money. It will be, soon, but now it is more of a burden to fix up than money that you could readily spend for your D’s education.</p>
<p>Of course because I’m no expert they could completely ignore any of this and just consider it as is on the forms.</p>
<p>Assets can increase your EFC which can affect Pell eligibility but you have a couple of possible saving factors here.
If your income is below $50k and you file a 1040a or 1040ez tax return then you will qualify for the simplified needs test which means assets will not be considered at all when calculating your EFC.</p>
<ol>
<li>For 2009-2010 FAFSA you may qualify for an automatic 0 EFC. The requirements for 2008-2009 were an income below $20k and filing a 1040a or 1040ez. For 2009-2010 the income limit is supposed to increase to below $30k.</li>
</ol>
<p>If for some reason you are not able to file a 1040a or 1040ez (if you itemize deductions, sell stocks, have a taxable State tax refund and various other things) then you will not be eligible for simplified needs or automatic zero. Even so it does not sound like the house should have too much of an impact on your EFC. If the value of the house is $60K and you co own it with your sister then your share of the value is only $30k. If you have to borrow to do the repairs can you borrow against the house? Or alternatively directly against the shares? That would reduce the reportable value of the assets (consumer debt is not reported on FAFSA but debt against a reportable asset such as a mortgage against the house can be used to reduce the asset value). But if you borrow against the house make sure you have spent the money on the repairs before you file FAFSA or the borrowed money will be an asset.</p>
<p>Your primary home and your retirement accounts are not reportable on FAFSA. The FAFSA formula additionally gives you a certain amount of asset protection depending on you age. After that only @ 5.6% of your assets go to the EFC. </p>
<p>But if you can file a 1040a or 1040ez that would probably give you the best EFC. Be careful not to do anything that may make you unable to file one of these - for instance selling stocks.</p>
<p>The Pell is based on EFC. For 2008-2009 any Pell requires an EFC below 4042. The maximum Pell is $4731 and requires a 0 EFC. As the EFC increases the Pell decreases until it becomes 0 once the EFC reaches 4042. ACG requires Pell eligibility (as well as some academic requirements). If you go to the calculator at finaid and enter your financial information it will give you an idea of what the EFC might be. It is quite accurate but has not been updated to reflect the changes for 2009-2010.
[FinAid</a> | Calculators | Expected Family Contribution (EFC) and Financial Aid](<a href=“Your Guide for College Financial Aid - Finaid”>http://www.finaid.org/calculators/finaidestimate.phtml)</p>
<p>This is a bit long and maybe a bit rambly (I am tired) so if you need any clarification let me know.</p>
<p>Agree with SCM-- try for the automatic 0 EFC.</p>
<p>Also consider the timing issue-- remember that the assets you report are a snapshot, the amount of reportable assets you have on the day you file FAFSA (or Profile). So if the house is still in Probate, for example, or if title hasn’t passed for some other reason on the day you file FAFSA, it’s not your asset.</p>
<p>Beyond that, borrowing against the house for repairs to lower the equity sounds prudent. You can also shelter some of it in a retirement account. But remember that even if you end up reporting the equity in the house (30K), and the stocks (20K), you have a single parent asset protection allowance of around 20K, so you might get assessed at 5.6% of the remaining 30K, which translates into a bump in EFC of only about $1600. Not a huge deal, unless it pushes you over the Pell threshold.</p>
<p>Actually the renting the house to a relative may make you ineligible to file a 1040a or ez (not sure as i am not a tax expert but the 1040a and EZ are very simple tax returns so I have a concern there). You may want to look into that and try and set the agreement up to where it is not reportable as taxable income.</p>
<p>Thank you all for sharing your knowledge. I took your advice, SCM, and came up with a worst case EFC of $2600 from the fin aid calculator. I do file a 1040 as I usually have about $1K/yr from a small consulting job which comes with a 1099 (and more headaches than it’s worth!). I wouldn’t mind giving it up to avoid all this number crunching for the following year but thought you also had to have some sort of public assistance like reduced lunch to avoid asset allocations. Am I mistaken? I haven’t taken any taxpayer funded assistance other than health insurance for them - again, just a personal choice - though I suppose we would qualify and signing them up for school lunches doesn’t mean they actually have to use them does it? It’s a small thing but I like to think those programs were set up for people who are truly in need and we’re not as long as I budget correctly!!</p>
<p>The house is not being probated, sblake7, as the title passed directly to us upon her death. About half of the stocks will be probated (the others I had set up in a “transfer on death” account) and I hadn’t realized probate would exempt them from FAFSA this year, so thanks for that! I’ll probably have the estate sell the ones I want to liquidate (although I hate to part with oil stocks right now!) before making a final distribution. I haven’t talked with a bank about a loan on the house and have no experience with financing investment property but that’s another good idea. If we could took an equity line of credit, instead of a straight mortgage, we could use some to refi other debt and borrow the rest as we do the work. The rental income will go directly to my sis for tax purposes as she already itemizes and can use the deductions that come with the house whereas I cannot. Also, her kids are much younger! </p>
<p>I guess I’m still looking for the method people use to value their real estate investments. It seems very ambiguous and one of her potential schools requires 100% FAFSA documents be submitted whether you’re selected for verification or not!</p>
<p>Does the municipality in which the house is located presume to do 100% valuation for property tax purposes? If so, you can use the assessed value as the value of the property - even if towns say they use 100%, it’s often less than the value at which a realtor would list for sale.</p>
<p>Otherwise, I think there are websites that allow you to value a property based on location, size and condition.</p>
<p>Yes, I think all of NY State is now supposed to be at 100% valuation for school tax purposes. And that’s the only valuation document I can come up with if asked for, unless I spend money on an appraisal which I’m sure can’t be required. Does FAFSA verification typically include real estate valuation?</p>
<p>So sorry about your mom. I wish you all the best at this trying time!</p>
<p>As to the annuities. Find out if it is absolutely necessary for you to receive this money right now. When my mother died, we had up to five years to decide how to receive it, and one of my sisters left her share in that account for almost the whole five years! I can’t remember all of the options we were offered. I think one was to take it in installments over the course of those five years.</p>
<p>If the money is in an IRA, sometimes it is possible to take your share as a “beneficiary IRA”. Essentially, the money stays in an IRA in your mom’s name, but pays out to you at a rate based on your age. The principal would be invisible to FAFSA, what you take out each year would be income.</p>
<p>Thanks for condolences, it has been trying in so many ways but I know she’s happy and healthy now. Yes, Mom was a retired teacher so she had a 403(b) TDA which she only took the min. distributions from. The 5 year hold or inherited IRA are the choices I’m looking at. I’d prefer the latter both for conservation of principal and for making my own investment choices. I didn’t realize either would make the principal invisible to FAFSA though, so thanks!!</p>
<p>Sorry about your mom and the suddenness of the situation. Also, sorry about the sibling hassle. You and your sister should talk about the house and determine if you have any plan to share those proceeds, if so, make that legal change now so you own a smaller share…or did your mom want you two to have the house as a thank you for her care of something? There must be some reason she only put two of you on the home- did she make up for that some how in the will? </p>
<p>These issues are fraught with emotion, if you can address the issues before FAFSA so you are not doubly hit, first by declaring 50% equity, then by selling and sharing with siblings, that would be smart to do.</p>
<p>Can you use some of the stocks/liquid assets to make some of the repairs before FAFSA?</p>
<p>I believe valuation on that asset would be how much you would net from it- so what would it sell for less commissions and other expenses?</p>
<p>You mentioned that she is applying to pharmacy schools. Do you mean that she is a college senior and is applying to professional school now? IF that’s the case</p>
<p>1) Your assets don’t matter. She only has to report her own income, as she’s an independent student, unless the school requires your information.</p>
<p>2) She’s not eligible for Pell grants if she’s going to a postgraduate school.</p>
<p>No, juillet, she’s a HS senior applying to 0-6 PharmD programs, and my first which is why I’m tearing my hair out!
Somemom, the 2 of us were deeded the house because we were her primary caregivers for 10+ years, I took care of their home, shopping, finances, etc while my sis took care of their medical needs. After my dad passed 4 years ago, she knew we would make sure she didn’t get shipped off to a nursing home which was her greatest fear. Also, two of my sisters are not great with handling money and constantly borrowed money without making any effort to pay back (they both make at least twice as much as I, but feel entitled to purchases I consider discretionary without considering the consequences.) My parents believed in helping everyone as much as they could, but they were a little put out by the new cars, foreign vacations, expensive homes, etc. of those two who had to have many of their regular payments made by my folks. I finally shut off the money faucet last year and they have been refusing to help for the last 8 months when she needed 24 hour care and telling us to just put her in a home. She was a wonderful person and didn’t deserve that.<br>
We have no legal obligation to share the house with them but I wouldn’t feel right about that and don’t want to cause a rift in the family. I would never actually put the house in everyone’s name as I can’t see us working through renovations, etc. needing a consensus of 5. It’s bad enough that the 2 “moochers” now seem ready to contest a very simple will over it - and it’s not even part of the will! Anyway, they’ll waste all kinds of time and money on legal fees, as they have in the past, and I’m going to wish I was a fly on the wall when they get their legal bills and realize Mom and Dad are no longer there to pay it for them!</p>
<p>Oh goodness sk8rmom - what a situation you have on your hands. I really feel for you. If you are planning to share the house with you sibs find a way to borrow the money for any renovations against the house so that it is the net proceeds you are sharing not the gross proceeds with you and your sister having paid for repairs. That also is practical from a financial aid point of view as it reduces the reportable asset.</p>
<p>Ouch! A friend of mine has a similar situation, Dad deeded the vacation home on acreage to all three- one wants to subdivide and each build their own other place, the other two don’t want that, nor do they want to share; they just want to be brats.</p>
<p>Only you know your family dynamic, but I am in accordance at not indulging the bratty ones- taking not giving and not willing to help avoid the home; heck, they could have simply paid for a few shifts a week for a respite care person if they could not volunteer themselves. It would be very interesting to hear how they justify it to themselves.</p>
<p>Anyway, if you can determine your share of the home and use the realistic net value that makes sense to me; keep records as to how you derived the amounts. I do not know whether you are allowed to show the home equity as divided by 5 sibs or not if they are not legally on it??? </p>
<p>Guess I would look to your mom’s intent- did she deed control so the others would not force her out or did she intend you two to have it?? And, just how much family harmony will there be after you give over your “share” to the others? Or will they still be pouting about something?</p>
<p>Just an aside on the annuties and estate matters: My mom’s annuity was a bear to get paid on. The insurance company would ask for one thing, and when they got it, ask for yet another, yadda yadda. With some diligence it took months (four or five I think.) So if you are not so diligent, it could take a while for any transfer anyway. </p>
<p>As to what is fair, my older brother took the lead as to dividing everything, and even if her will says “x equal shares,” valuation and timing issues arise. Although for years her will said that I was to be the executor, a few weeks before she died, she changed her will. All I said to my brother on all of this was “thank you” since he really did work to get it all taken care of, and to quibble over these things would have been wrong in a larger way. I wish you comfort in your mourning, and good luck on all else. Remember, some people will never be satisfied no matter what you do.</p>
<p>Yes, it’s maddening. I thank God she chose the two of us who can work together well. The others are trying to tell me not to replace a 25 year old roof that’s leaking 6 inches away from the main electrical panel!</p>
<p>Pay for a nursing shift? I had to practically beg and then pay one of them an hourly rate any time she did come! But I know they really did love Mom, just have very strange ideas about money. They’re about 10 years younger and I’m not sure what happened during their formative years that may have led to this! They did have wonderful excuses, like fatigue, illness, or prior commitments, but used them over and over again to the point that my sister and I had almost no life left in us from trying to work, take care of our kids, etc. and my poor sister had to get back on the overnight schedule just 2 weeks after major surgery! I was almost to the point of making Mom move in with me as my b-in-law and I were so worried about her health.</p>
<p>Mom was very sick and tired and didn’t feel like coming up with a way to address the house and loan issues. Her only goal was to still have $75K left for us to share and I worked very hard to make that possible. She had the option of having the house revert back but declined and left it up to me to decide. Of course they’ll pout about anything and everything, but at least I’ll know I tried to do the right thing and still sleep well at night! I really want to avoid this spilling over onto my kids and their cousins, who are all really close. I’d never do anything to shortchange my neices and nephews and that’s the only part of the money flow from Mom that I allowed to continue. Right now I’m feeling like if the others irritate us too much, their kids may be the ones getting their “share”! How gauche would it be to complain about that?! We’ll see…</p>
<p>Sounds like I can just have a market value assessment done by a realtor for now so I can have some kind of value for Fafsa. My sister’s looking into the possibility of putting a line of credit or mortgage on the property but I think I may just have the kids sign up for those reduced price lunches they’ll never eat! Just maybe I can avoid the whole “what-if” nightmare and get on to more productive things!</p>
<p>When you talk to a realtor about a market assessment, tell them you want a very realistic “must sell now as-is” type of valuation. Many realtors are fixated on over-inflating the value to get the listing.
A financial aid counselor gave a talk at D’s hs. Said to put on a price that is “need to sell now” and NET of all selling costs, e.g., realtor commission, warranty, home inspection, termite fumigation (if that’s common for comparable homes), etc. It makes sense when you consider that the purpose of including the asset is to assess how much actual $ would end up in your bank account. Low-balling it is not deceitful; it’s reality.</p>