I posted this in another thread ... but it was suggested to me I start my own thread here.
I'm new to this forum - I've been doing some financial scheming of late & reading about FAFSA (spare me any moral lectures) & learning about college costs/assistance.
We are married with a child who will enter college in Fall 2013 - our child is very smart with a 4.0 GPA ... but no other talents that may garner scholarship monies such as music, sports, ....
I make approx 70k in retirement benefits. Spouse makes approx 38k as a teacher ... but spouse wants to quit working also next year for health reasons and has not been teaching long enough (five years - she was a stay-at-home mom for many years) to have vested significantly in the State teachers retirement plan. Most of our savings are tied up in a 401k.
I've found the FAFSA penalizes us heavily due to my income ... but if only my spouse's income were considered is very generous (esp if not working full time)
Our house is paid for, but we plan to sell & move before or when our child finishes high school ... sale of the house will garner us between 200k & 250k. Our plan is to buy a smaller home near the ocean for about 150k and banking the rest (I see no reason to be penalized for having lived frugally & paying our house off). Then we plan to rent a large apartment or small house wherever it is our child ends up going to college. We will then split our time between our retirement home and where our child is going to school.
I have been considering the idea of obtaining executing a "legal separation" agreement and establishing my legal residence at our retirement residence (driver license, vehicle registration, utilities, State tax form) & my spouses legal residence at our daughter's college town.
Since we are in Texas which does not have a court mechanism for "legal separations" ... it seems we would have to have a private "separation agreement" drawn up by an attorney ... it may be possible to even have a "maintenance agreement" included which would allow us to split my retirement income to reduce each of our Federal income tax burden. (We would of course file as "Married Filing Separately" with spouse claiming our child as a dependent)
We are not interested of course in trying to do any kind of sham divorce ... but since we would be traveling a lot during this period of our lives (sometimes separately) and spending considerable time away from each other, I see no reason not to separate our incomes in this manner & thus shelter my retirement income from FAFSA calculations. (Divorce would be out of the question anyway as I need to keep both spouse & child on my retiree subsidized health insurance)
Any thoughts? (and again, spare me any moralizing)