Anyone know how an annuity works?

Paying for College
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<p>I know that life insurance proceeds don’t count as an asset or as income, but how does an annuity count in the FAFSA or CSS Profile if inherited? Anyone know?
Can this financial aid stuff GET any more confusing…</p>

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<p>Actually I’m afraid life insurance proceeds are counted as both income in the base year recieved and as an asset if any of the money is left when filing FAFSA. Sometimes a financial aid administrator may make an adjustment to the asset but generally not to the income.
<a href=“http://www.finaid.org/educators/pj/lifeinsurance.phtml[/url]”>http://www.finaid.org/educators/pj/lifeinsurance.phtml&lt;/a&gt;&lt;/p&gt;

<p>Finaid also has information about annuities. From looking at it briefly it looks like the value of an annuity may be ignored as an asset but the proceeds are treated as income.Here is the finaid link with several articles about it.</p>

<p><a href=“http://www.finaid.org/search/htdig/htsearch.cgi?method=and&format=cust_long&config=htdig&restrict=&exclude=&words=annuities&x=0&y=0[/url]”>http://www.finaid.org/search/htdig/htsearch.cgi?method=and&format=cust_long&config=htdig&restrict=&exclude=&words=annuities&x=0&y=0&lt;/a&gt;&lt;/p&gt;

<p>finaid is the most comprehensive source of information about financial aid that I have found.</p>

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<p>Wow - I have been on finaid many times, and I missed the annuity piece - thank you for the link. My school told me the life insurance is not counted as income - as it isn’t taxable - or something - now I’m thinking maybe I misunderstood. I will check back with them.</p>

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<p>This is information you really should verify with someone as to be honest, this has been my understanding. BUT I am a parent, not a financial aid expert.</p>

<p>My understanding is that the amount IN your annuity is not treated as an asset, but any amount you contribute in the tax year for that FAFSA IS treated as income for that year. </p>

<p>There have been a number of discussions re: life insurance. I do not think this is viewed as income and you are not taxed on it but any amount in your savings IS viewed as an asset.</p>

<p>If you are receiving income from your annuity (in other words, if you are getting payments) that money IS treated as income also, and you will receive a 1099 at the end of the tax year saying so.</p>

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<p>I think I recall seeing a question related to cash value life insurance on the CSS Profile, so I can only believe that the profile will count it as an asset ???</p>