<p>full collapse:
there are many types of trusts- in reading this board and other research, it seems like the assets of the trust would belong to the beneficiary of the trust for finaid purposes. So, if your parents set up a trust for your son, those would be his assets, if the trust was for you, they would be your assets.</p>
<p>ok my trust is confusing its mine sort of, I only get it until Im 22 then it transfers to my mom.</p>
<p>We are in a situation now where we have some money in our bank account some of which is being held for a relative for whom my husband has power of attorney in an account which also has our names on it. Right now it looks on paper like we have a year’s tuition already saved, when that is not the case. I have heard that many families are penalized for savings and often spend down more liquid assets, such as savings, to qualify for more financial aid. We do need a new car and could pay cash for it – this would not be a luxury, since we are both driving vehicles with 100,000 + miles on them.
The other concern is that if we buy a new car, that is considered an asset, and it still counts against us. </p>
<p>Additionally, my son has about $8000 between savings and bonds in his own name. I’ve heard that his savings, puny as they may seem, will be considered more heavily than ours against financial aid. We think he should spend that down, too, and he feels that if he gets no financial aid, and he’s spent the money, he will be stuck. Most kids would be happy to be told to spend some money, and he does have an inexpensive used car that he does have expenses for, but he has a part-time job to support that. $8000 is still not a huge amount of money when you think of what college costs, but if he doesn’t get help, or mostly loans, that will be gone pretty fast anyway.</p>
<p>We have some money in a 529 for him but it has performed so poorly that we have not contributed too much to it. Our biggest assets are my husband’s 401K and my retirement account, which I’m told don’t really “count”, and of course, our home. </p>
<p>How much are families expected to borrow against home equity? Currently, we could afford to send one to school on our home equity, but there’d be little equity left for the other two children to follow in two years.</p>
<p>Then, there’s the whole question of whether it’s right to move money around to get a better financial aid package. If you have enough money in the bank to buy a new car, isn’t it also assumed that if you have a kid going to college, that’s where the money should be going instead of to a car? And since you can withdraw from traditional and Roth IRAs for tuition tax free, wouldn’t that also be considered an asset?</p>
<p>Good questions. Use some of the online EFC calculators (I think this site, Princeton.edu, etc) to determine your likely EFC under the federal (FAFSA) and institutional (CSS PRofile) methodologies. Then, how that applies depends on the school- schools like Princeton do not count home equity, neither do most FAFSA schools (some have their own questionnaire whihc asks) other schools include home equity. I did have one FAFSA public ask about our home vaue and about our cars, but they did not seem to count them against us- perhaps they are looking for really pricey cars? In general, the only assets that count are home, real estate, cash & investments & business value, not jewelry, art, cars, boats, etc. I am not sure what would happen if some one had investment grade diamonds, they would likely be an asset whereas your wedding ring would not. </p>
<p>If you look at the FAFSA it has worksheets (online) where you can click and it will describe pretty much all the possible items to be included in each category.</p>
<p>If the asset in the aco**** for a relative is THEIR asset and you are trustee, then it is my understanding you would not report it. It may depend on the exact vesting of the accounts.</p>
<p>Yes, money in your son’s name is generally considered available at 35% of the asset whilst the parents is charged 6% of the asset (rule of thumb, each school can do whatever they want.) If there are things that your son can responsibly spend money on then that would be smart, but if the money is needed later, then be careful!</p>
<p>A school could say you have an EFC of $0, then fund 1/2 your need with loans or leave you gapped (not fully funded) or they could fund it all with no loans. You should check each schools website to determine the likely considerations.</p>
<p>The car is your family’s decision. If you buy it for cash, because you really neeeded it anyway, and then are gapped by finaid, will you need that money back to pay the difference?</p>
<p>Yes, if one has credit card debt and cah in the bank, it is generally smart to use the cash to pay off the debt. Generally, it seems smart to pay off car loans or pay cash for a car- if you are going to be on the borderline of receiving finaid. If you would not get it any way, then don’t bother.</p>
<p>How’s that for confusing!?</p>
<p>I posted this sometime ago. Go to <a href=“http://www.studentaid.ed.gov%5B/url%5D”>www.studentaid.ed.gov</a>. Do a search for efc formula, dependent student. It takes some work to get all of the numbers to input and go back and forth to the charts that are provided. But the calculation matched to the penny the EFC from a state school that used just the FAFSA.</p>
<p>As others have already mentioned, IM schools look at variety of assets - for example, Brandeis wanted to see retirement accounts (although I believe that we would have had to have much more than, sigh, we due for that to come into play). Because of this, start the CSS paperwork ASAP - you may be scrambling around for all sorts of paperwork.</p>
<p>It looks like income is verified through one’s tax filings. How are assets verified? Does anyone go in and check if the numbers are accurate? What about items with subjective values?</p>
<p>The schools may ask you to provide statements for the assets listed.</p>
<p>What do you mean “subjective values”?</p>
<p>Subjective assets like real estate, art etc. I’m sure peop;e don’t get appraisals on everything right before the forms are filled out.</p>
<p>What happens if assets are accidentally, or purposely, left off the forms? How would anyone know the information is correct?</p>
<p>Do people count all their assets like the furniture in their house the coin collection in the safety deposit box?</p>
<p>Collectibles are not considered assets for FA purposes.</p>
<p>Real Estate is considered an asset.</p>
<p>Use the lowest reasonable valuation you can come up with. For real estate it may be the appraised value, the assessed value, or the federal indexed value.</p>
<p>Businesses have even more legitimate values.</p>
<p>Stocks are valued at whatever the market indicates on that day.</p>
<p>Leaving assets off the form is fraud. Do not try it. If there is say an income event on the tax return that indicates the existence of an asset that you did not list, you will be very sorry.</p>
<p>So would a very illiquid asset like a private limited partnership or a time share be valued at close to zero since one may not be able to convert it into cash or is not allowed to borrow against it?</p>
<p>The limited partnership question came up with a client of mine a couple of years ago. When I asked FAFSA how it should be treated they told me that it depends on who controls the assets. If you are a limited partner, you have no control and therefore the asset legitimately has no value. If you are a general partner and have control, then the asset would be treated with a normal valuation.</p>
<p>The time share depends on if you actually have ownership of the property or if the time share is simply access to the property.</p>
<p>So then do you leave the limited partnerships in which you are a limited partner without any control off the form? If not, what do you do with the information?</p>
<p>Leave them off the form. This is what I have been told by by people at FAFSA.</p>
<p>The partnerships all have K1’s which are part of the tax return. Does it cause any problems if the partnership value is not included on the FAFSA form when the existence of the partnershis is indicated by the K1’s? </p>
<p>What is the treatment for a property (vacation house) that is owned by 4 people, each with a 25% share, held as tenants in common, where the others won’t sell the property and won’t buy you out and you cannot borrow against the asset?</p>
<p>Previously you mentioned federal indexed value. What is that and where does one find out how to use it to value a piece of property?</p>
<p>The presence of the K-1s will likely need to be explained to the school. In effect, the only value that an LLP has to a limited partner is the income that the LLP produces. You HAVE to report the income from the LLP.</p>
<p>As to real estate held in common with others. An LLP has specific legal protections that do not exist with property held in common. You will need to report 25% of the total equity in the property. If it is a income generating property, you can likely report that as a business asset.</p>
<p>The federal indexed value is the federal housing index. There is a calculator at finaid.org.</p>
<p>Thanks, I’ll try the calculator.</p>
<p>How does business property work in the financial aid calculation?</p>
<p>Also, what do you do with income that comes from converting a regular IRA to a Roth IRA? It is a one time event (income wise) and you never get the funds to use because they go directly from one type of IRA to another. It is not really income in the traditional sense.</p>
<p>Business assets are discounted compared to personal assets. Do Not Overvalue your business. Ask your accountant to give you the lowest reasonable valuation for your business. Not the one you show the bank to get a loan.</p>
<p>There are a dozen different ways to value a business, don’t pick the highest one.</p>
<p>I remember seeing a document on the FAFSA website a couple weeks ago that imputed rollover income should not be counted as income for FAFSA purposes. You will need to go to the FAFSA website and look up the specifics as to how to account for it though. A search on “ira rollover income” should get you the right document.</p>
<p>Thanks, any thoughts on the IRA conversion question?</p>
<p>I went to fafsa.ed.gov and searched on “ira rollover income” as you suggested and there were no results. Any other suggestions on where to get information on the IRA conversions?</p>