$75000 gift from grandpa.. Can I not report it?

Paying for College
1

So I’ll be a college freshman next year. I got into top school: you know, the ones that give insanely good financial aid. My family makes over $350,000 a year but they’re offering $12,000 in grants to offset some of my $69,000 tuition and fees. Yes, that would be amazing if that were the end of story.

But here’s the thing— my parents are bitterly divorced, I have not seen my dad for 16 years, he was physically and emotionally abusive in the past, he does not pay child support or visit me despite being required to do so by the law, he obviously will not pay a penny towards my tuition despite agreeing to do so in the divorce settlement, and I don’t know his phone number or his email address or where in the world he lives or what he looks like. My only contact with my father is through AIM messaging (feel free to pause to take in how sad that is). Basically just one step before not even knowing who my father is.

But I’d rather not even know who my father is. Because then, we wouldn’t have to count his $200,000+ a year income! Isn’t it sad that the ONLY way my father has impacted my life is by dramatically increasing my EFC? Here’s the thing. My college really is asking for $57000 a year from my mom who makes $150,000. Obviously she’ll get under $100,000 after taxes and whatnot, and she still has to pay mortgage and a bunch of other costs. Paying 60% of her real income towards college is really not possible no matter how we look at it. She couldn’t do it she tried.

My dear grandparents, who are very well off and live overseas and have raised me since I was little (my mom didn’t start making six figures until not long ago—she used to be so poor she couldn’t afford childcare for me) have wired over $75,000 to my mom. I am extremely grateful, because this will allow us to actually make things work, though I will still have about $20,000 of debt when I graduate. But at least now I have a way.

I suppose I have to report this gift on next year’s financial application. But I am so afraid that they will dramatically reduce/get rid of my aid, and we can’t afford that. I have always been an honest and moral person, and have rarely been seen doing the wrong thing. But I’m not irrational. I can reconcile my moral reservations with not reporting the money, because discarding my lifeboat for the sake of some arbitrary moral beacon of light while I’m drowning would be stupid. And perhaps what I want to do is unfair, but have I not been dealt an unfair hand? We are treated as a family that makes $350,000 a year, but we’ve been living the life of someone who makes much less than half of that, and even less if you go back a few more years.

My mom has almost zero savings and zero in checking. I’m not kidding you. My older sister just graduated college and depleted them. I need every penny of that $75,000. Is there anyway we can get around reporting it in the least illegal way? If no such way exists, is there anything else I can do to make sure that it impacts my financial aid the least?

My apologies if I sound like a liar and a fraud. I really really don’t want to be. But please try to understand my situation. Thank you for any advice you can give. Right now I can’t see any other way besides biting the bullet and reporting it, and taking on another $20,000 in private loans.

2

You will need to report the money when you complete your FAFSA for next year. You do not need to report it now. Some of the seasoned posters on this forum know the in’s and out’s of things like 529 accounts, so maybe they can help. Could OP give the money to his mom & have her mom put the money in a 529 account in her name? Not sure if that is possible, or maybe there is a better way to handle it.

3

Did you have to file FAFSA or Profile in order to get the grants?

4

OP says the money was wired to his mom. If so, then this sounds like a gift to his mom, thus not reportable on FAFSA as the student’s untaxed income or as the student’s asset.

Whatever isn’t spent by the next FAFSA filing date and which exceeds the mom’s allowed asset amount would increase EFC by 5.6%.

Perhaps someone familiar with Profile can comment as well.

5

^ Profile would depend on the school. I don’t think there is a fixed formula.

6

Your mom should ask for a “professional judgment” based on the story you told above. They may exclude it, or only include part of it in their FA determination.

What your grandparents could have done is, they could have paid your tuition directly instead of sending it to your mom. However, if your school is a CSS school, there is a question that asks for “other sources of funds” – this would go in that category for 100% transparency. (I don’t think there’s a question like this on Fafsa, but I am sure someone will chime in on this.)

Finally, I think there is a way to get the noncustodial parent’s income excluded. There are people on this board who can weigh in on that.

7

This is just a question for the heck of it. Say, the grandpa wired 75K as a LOAN. Is this still to be reported to the school as income?

8

.
We all pay taxes and whatnot, and we all still have to pay mortgage and a bunch of other costs.

Your moral failing is your sense of entitlement. You’re not drowning because you are low income. $150k is upper income. You are drowning because you imprudently picked a school you can ill afford. And now you want us to ease your conscience about committing fraud.

No one forced you to go to this expensive school. Many cheaper schools would enable you to reach your professional goals. Many higher income families pragmatically eschewed the prestige game to pursue schools that give merit money. If you had the profile to get admitted into a “top school”, then that door was open to you, too.

9

^^^That’s an interesting question. They’d have to draw up papers and maybe the loan should be secured by their house. That way they have less home equity available, and it is not reported as income when you take equity out of your house. Then she can pay them back on an agree-upon schedule.

10

This is not income to the Mom. Brantly, you’ve posted this before but it’s not true. I can give as much money as I want to anyone I want in any calendar year and for any reason. I need to file a gift tax return (NOT PAY TAX) for the year a gift was made in excess of 14K per recipient. But the recipient does not pay taxes on my gift- that obligation is on my estate- when I die- if I have used up my lifetime credit (which 75K in no way approaches).

I don’t know if the grandparents file a US tax return. For sure they could have structured the gift to go directly to the college. And for sure the “other source of funds”- plus the cash on hand on the day of filing a FAFSA- yes, these are issues. But the mom isn’t on the hook to pay income tax on something that isn’t income. It’s not income. It’s not a dividend. It’s not a royalty. It’s not a capital gain. It’s not a windfall (like winning a car on a game show). It’s a gift, and gift taxes are paid by the giver, not the recipient.

Back to you OP- does your mom have a financial advisor?

11

Wrong, wrong, wrong. A genuine gift is never taxable income to the recipient. Gift tax owed, if any, would be paid by the gift giver. And since the gift giver, who is living overseas, is presumably not a U.S. citizen with U.S. tax obligations, this does not appear to be a factor.

12

^^^^Okay! I stand corrected!! I’ll delete.

13

@brantly When you delete after people comment on and quote your post, it can become confusing for people trying to understand the thread.

14

Let me get this straight. Your family income is over $300,000 a year and you got need based aid? How did that happen.

Where is the $75,000 now? If you have it on the day you complete your financial aid forms, yes, you must report it as an asset.

15

This doesn’t make any sense. If you have no contact with your father, then how do you know how much money he makes, and how did you get him to fill out the FAFSA so that his income got counted in your FA calculation?

16

If dad is the NCP, his information would not appear on FAFSA. But it would need to be reported on Profile, or a similar form, since OP will be attending a “top school: you know, the ones that give insanely good financial aid,” unless OP was given a NCP waiver. In which case, dad’s income would not be a factor.

17

In post#14 I meant FAFSA or CSS.

If OP’s dad was excluded because of the NCP waiver, then why is the the OP complaining abour his dad affecting his FA calculation?

Makes no sense.

18

Even if they don’t count this $75,000, the school is only giving $12,000 in grant money to this student…whose parents have a combined income in the $300,000 range.

But yes…this $75,000 will be an asset. But here is my question. Why wouldn’t you use some of it to pay for your college education?

19

Agreed. I find it unlikely that a family income of over $350k would garner $12k in need based aid, even at the most generous schools. And if dad’s income was disregarded because of a NCP waiver, then why is OP claiming that it hurts his aid?

20

Totally agree with @BelknapPoint. There is something very disconnected in this story.

If this student was accepted to an uber generous college as the OP notes…and ONKY the mom’s $100,000 income was used to determine need based aid…that aid would have been far more than $12,000.