<p>Two FAFSA questions:</p>
<ol>
<li><p>A trust, of which a parent is one of three co-equal beneficiaries, owns a one-half undivided share in some family real estate. This real estate, which has a house on it, and all the furnishings in the house are the only trust assets. Is this interest in the trust reported on the FAFSA as a parental asset, and if so, how?</p></li>
<li><p>A soon-to-be college freshman owns two annuities that make monthly payments and will continue to do so until halfway through the student's senior year of college. One annuity is a life insurance death benefit, and the other is an inherited Individual Retirement Annuity. Both benefits could have been taken as lump-sum payments, but annuitizing was a better option both for tax reasons and because of the guaranteed interest rates. Do the future annuity payments get reported on the FAFSA, and if so, how?</p></li>
</ol>
<p>I mighty be wrong on both of these answers…hoping someone else pipes in.</p>
<p>I would suggest calling the FAFSA helpline regarding the trust. When we had the same situation, we were told that OUR share of the value of the trust (also real estate) had to be listed as an asset on the FAFSA. </p>
<p>With regard to the annuity payments, your kiddo likely gets a 1098 for this. It Is included as unearned income on his taxes…I believe. You report what was paid for the tax year for your FAFSA…not future payments. You will report future payments in subsequent years.</p>
<p>I agree with thumper about the annuity payments, you just pay on what was received during the tax year being reported.</p>
<p>The student does get 1099 forms for the annuity payments. It makes sense that future payments are not included on the FAFSA, because even though they are guaranteed, the funds are not available until the payments are actually made.</p>
<p>I’ll do some more research on the trust question. Thanks for the responses.</p>
<p>Inherited IRA isn’t reported as an asset of the child?</p>
<p>The inherited IRA is being taken as a monthly annuity, so apparently only assets from the IRA that have been received (i.e., not future payments) are counted as assets of the student.</p>
<p>Any inherited IRA is subject to RMDs, though. Taking distributions (by whatever name, and regardless of the investment vehicle) shouldn’t convert an asset to a non-asset. The IRA’s value isn’t the sum of the income stream, but it’s not zero, either. The bene should be getting a 5498 each year, showing the FMV of the IRA.</p>
<p>Having Googled a bit, it looks like the answer is not “there’s some magic in annuities,” but rather “IRAs aren’t reportable as assets.”</p>
<p>I inherited an account from my mom when she died. I get an annual distribution which is included on my taxes each year. The value of the account is not included as it is a retirement account.</p>
<p>Not sure what this student would do as clearly this is NOT being used as a retirement account.</p>
<p>allyphoe: yes, an inherited IRA is subject to RMDs, but the amount of the RMD is based on the life expectancy of the beneficiary, and when the beneficiary is young the RMD is a relatively small amount. Here, the sum of the monthly annuity payments over the tax year are easily greater than the RMD. The original owner died before taking the RMD for the year of his death, so that RMD (based on the original owner’s age) was paid to the beneficiaries as a lump sum.</p>
<p>The beneficiary is getting a 5498 that shows FMV, but because the benefit has been annuitized, this full amount is not immediately available to the beneficiary. Are you saying that this inherited IRA is not reportable as a student asset? If so, do you mean just the remaining annuity payments (which, I think, would be the case for any annuity, even if it wasn’t part of a retirement account), or are you including the annuity payments that have already been received?</p>
<p>[The value of / what’s in] the IRA is (apparently) not an asset.</p>