<p>My guess, and its purely a guess, is that Mom is an income beneficiary of the trust with the power to invade (use) the principal of the trust. Usually the power of the Trustee to allow the income beneficiary to use the principal of the trust is limited. OP is probably the remainder (if any) beneficiary. If Mom takes the entire trust, then there is nothing for OP to declare on FAFSA regarding her assets, they are gone. Mom may have to show it as current non-taxable income.</p>
<p>Hat, distributions from a trust may be non-taxable return of principal (and in this case, are likely to include). Someone should be getting a K-1 from the trust (similar to partnership K-1s) and kid should try to find out who is to get K-1. Mom may still have to show assets – but if she takes and spends in one year, may not be anything to show.</p>
<p>
</p>
<p>kayf - I don’t doubt that the money will be non-taxable, but I thought that FAFSA required you to show “other non-taxable” income, such as gifts. I would consider this trust distribution to be similar. I may be confusing it with CSS/Profile.</p>
<p>Hat, if a gift occured, it likley occured when trust was established. If trust was established with say 50,000 of securities, and securities were sold for 51,000 and 51,000 was transferred to mom, that would be 1,000 of income. The 50,000 is not income, taxable or otherwise. On FAFSA, the student is required to report amounts paid to him, or on his behalf from other than from custodial parent. I do not see a similiar question for parents, but it may be on CSS.</p>