I think FAFSA and CSS at most colleges do not count funds in an inherited IRA (from a non-spouse relative) as assets, but disbursements from that inherited IRA count as income. So it seems to me that for freshman year, it should not impact financial aid calculations, but then if the student uses $30k to pay for their freshman year, then for the sophomore that $30k will reduce their financial aid. Does anyone have direct experience with this? Did colleges disregard inherited IRA the first year, then reduce financial aid the second year? Are there specific colleges that dealt with this favorably to you? Thanks.
Not sure I understand the question.
What is the RMD (required minimum distribution) from the inherited IRA- are you suggesting that it’s $30K? Or that your intent is to quickly liquidate the IRA by spending it down over the four years of college?
The scenario would be to take $30k disbursement per year for 4 years.
Will it push you into a higher tax bracket for each of the four years? If so, you need to weigh the tax consequences (all your income will be taxed at the higher level, not just the $30K).
Can you hold off on doing this until senior year so it won’t impact the previous year’s aid? IRA assets won’t be listed on your FAFSA…. but liquidating assets creates income, and income “counts” more heavily on the aid formula than assets. So your four year plan is going to generate more income, and once the “prior prior” year shows up it is likely to reduce your aid.
Have you run some NPC’s without using the IRA funds- and are you going to qualify for significant aid???
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Who inherited the IRA…the student or the parent?