<p>I am filling out the FAFSA Form for the first time and boy am I excited. I hijacked the daughter’s username because I am too lazy to create one of my own. I am also cross eyed from staring at the FAFSA Forms. My question is this -under the student income section do I have to report a trust? It is a complex trust and all income goes back into the trust. There is no distribution to the student and, therefore, no income reported on her tax return. I also have a complex trust with basically the same scenario. I have called FAFSA customer service three times and received a different answer each time. If anyone can help I would appreciate it. I want to be honest and above board but also do not want the government to consider monies that we do not have access to - any input is appreciated, thank you!</p>
<p>If there is no distribution and nothing reported for tax purposes, I don’t think that would be “income” – but the trust itself is an asset that probably needs to be reported. (That’s assuming that she is the sole beneficiary of the trust) In any case, the the answer probably depends largely on the terms of the trust and how it was set up – so I really think you should get professional advice on that.</p>
<p>THe professionals are asking me to check with FAFSA because they don’t understand the gosh darn form and/or questions either. I was told by one Customer Service Rep at FAFSA that it would need to be reported as investments but not income. It is investments that cannot be utilized for college at this time, which is frightening. I am a single parent and cannot afford to pay the full tuition. I also do not want to get into trouble with the government by answering the questions incorrectly. Thanks for the advice, I think I will tell the kid to just forget college and get a job.</p>
<p>I would post this in the “Financial Aid” forum if I were you.</p>
<p>I think I found the answer, basically I am screwed.</p>
<p>daviban - this link gives more detailed explanations about answering the FAFSA questions:</p>
<p><a href=“http://studentaid.ed.gov/students/publications/completing_fafsa/2007_2008/ques3-4.html[/url]”>http://studentaid.ed.gov/students/publications/completing_fafsa/2007_2008/ques3-4.html</a></p>
<p>it does say trusts have to be shown as an asset.</p>
<p>You say you are a single parent. Is your income below $49,999? If it is and you are eligible to file a 1040ez or 1040a you may qualify for the simplified needs test which would mean the assets would not be considered. Good luck.</p>
<p>No income is not below that and thanks for the advice. I completed the form and my EFC is outrageous. The kicker is that the Trust is written so that it cannot be touched for another 8 years. I have been calling schools directly to ask how to handle. Those who also look at the CSS profile will see the explanation on that form. Looks like a second job for me. Oh well, thank goodness I am young and can handle it. I wonder how many people do not report trusts? I just cannot be dishonest. There is really no way to track it since I do not get income from the trust it does not appear on my return, the trust files its’ own tax return and has its’ own EIN. If only I didn’t have morals…</p>
<p>dav:
If the trust was set up for some special purpose like the surgery for a car accident victim or the life expenses of a person injured somehow, then you do not include it.</p>
<p>What is the purpose of the trust and why was it set up to be limited access? Was that optional?</p>
<p>Basically, SOMEONE has to own the asset…who technically owns it? who controls it? Can it be dissolved? If it is your parent’s trust and you are the beneficiary, but will not receive anything for 8 years, then you would not report it.</p>
<p>It may be a struggle (momentarily) to be honest and ehtical, but you know that it is right in the long run and it would stink to be later accused of fraud and pay fees and penalties :(</p>
<p>The Trust is owned by a deceased parent. I believe my parents were trying to keep colleges from getting my money because about the time I can access the Trust my daughter will be done with law school. There are very specific guidelines as to what it can be used for, it expressly states that it cannot be used for my daughter’s education. As far as reporting the assets according to all the experts the assets do have to be reported in the section under investments. I read this a few days ago but if you are the sole beneficiary it must be reported. I am sure it will all work out, I can always sell the house and live in a box under the freeway overpass 
It is frustrating because my EFC without the Trust is doable, oh well.</p>
<p>Hmm, I guess you could do student loans and then pay them off with the trust $ when they are finally available.</p>
<p>i did sell my house. living in a much smaller home. no trust fund will be headed my way in eight years either. actually, no trust fund will be headed my way ever. boo hoo.</p>
<p>just kidding…well, sort of. </p>
<p>you are most fortunate to have assets to draw upon, even if you have to wait a while for them. my family has worked so hard and we really have nothing at all to speak of. my oldest will graduate in 5 years because he has worked a lot to help out–and he will be debt free. my youngest was lucky enough to be accepted and attends a wonderful private lac. unfortunately, he will probably have a small amount of student loans to pay off. hopefully i can continue working to help him out. i really feel that is what i want to do for my kids. there is no trust fund for me…no trust fund for them. consider yourself lucky.</p>
<p>Please don’t think that the Trust Fund is enough for me to retire and sit on a beach sipping margaritas, it most certainly is not. I did not pay off my own student loans until I was 32. I have worked hard as well. My d’s father walked out when I was pregnant and we haven’t seen him since. He is a 4th grade teacher, how sad. Anyway, I worked two jobs for the first five years of my d’s life and I was never handed anything, everything I own I bought with my own money. Don’t get me wrong, it is nice to have a small nest egg but it will not change my life radically. I just wish my parents would have either spent it on themselves or, at the very least, had a better estate planner. There are so many things that could have been done to save taxes etc., if nothing else I have learned alot in the process. I am only 42 so working two jobs doesn’t scare me. I agree with crocodiletears, I think kids should have some “skin in the game” and take out a few loans. Hopefully, she will also have a work study opportunity. She had a few full ride offers but of course does not want to attend any of those schools. A few “second tier” schools offered her as much as $16,000 a year but guess what? She doesn’t want to go to any of those either. I keep telling myself it is more important that she be happy, it is more important that she be happy, it is more important that she be happy…</p>
<p>Thanks for all of the advice and input, I appreciate it!</p>
<p>Daviban – who is the beneficiary of the trust, you - or your daughter? </p>
<p>If it is YOU, then it wouldn’t be listed under the “student” income/assets at all – it would be a parental asset. </p>
<p>Here is what I would suggest doing:</p>
<p>First – get some legal advice as to the exact terms of the trust. The instructions written for the FAFSA are written with a certain thing in mind when they use the word “trust” - it doesn’t necessarily apply to the “trust” in your case. </p>
<p>If you truly have no current access to the money and receive no income, you might technically have a “future interest” or an “expectancy” – NOT an ownership interest in the trust. </p>
<p>What happens with taxes? Do you get a 1099 about the income in the trust, and have to pay taxes on income you never see? (then maybe the trust belongs to you) – or are the taxes somehow magically dealt with in some way that you don’t have to think about. (in other words, maybe the “trust” belongs to the “trustee” and not to the “beneficiary”). </p>
<p>Confused? </p>
<p>Here is what I think: if you really can’t get at the money, can’t spend it, can’t borrow against it, and can’t get any sort of distribution until the coming of the year 2015 — then it may very well be that you don’t have to report it. It’s not 2015 yet, is it? What you’ve got, essentially, are rights that have not yet vested, because the triggering event (a year) has not yet happened. </p>
<p>If you don’t get any paperwork reported under your social security number related to the trust - no 1099s or other documents that go to IRS – then that is also a good indication that it is not YOUR money (yet) and --more significant – no one is going to come asking about it. </p>
<p>I think you are going to have bigger problems if you are getting paperwork documenting your interest, or if the instrument is written in such a way that you can get at the money for some purposes and not others. Then it looks a lot more like yours – and the best course of action might be to talk to a lawyer about whether there is a way to go to court to break the trust. (Practically speaking, if your parents are deceased and there is no one else in your family entitled to the money, no one is going to show up to court to object when your lawyer files the paperwork – all you need is a probate judge with a kid in college to lend you a sympathetic ear). </p>
<p>Anyway, if I were in your shoes, based on what I <em>think</em> I am hearing from you, I wouldn’t declare the money, but I might tell the college about it in a separate letter where I could explain the very peculiar circumstances. </p>
<p>If all of this continues to make you dizzy, I have to tell you that “estates and trusts” was a really tough course for me in law school. All kinds of odd rules like the “rule against perpetuities” … but basically, its possible to tie up money for a long time. See: <a href=“http://en.wikipedia.org/wiki/Future_interest[/url]”>http://en.wikipedia.org/wiki/Future_interest</a></p>
<p>Calmom, my daughter and I have separate trusts. There is a trust of which she is sole beneficiary and there is another of which I am sole beneficiary. I have checked with the estate attorney, trustee and the accountants. Even though I cannot access the money I am sole beneficiary of the trust and, according to the various experts, I have to claim the trust assets as investments. Could it ever be traced? Probably not but I just am not the sort of person that fudges things. I am sure I will go to hell if I do! I have read all the Trust Documents, talked to the Trustee and the Estate Attorney as well as the accountant, all advised I report the investments. As far as how the income is reported it is on a 1099 but to the trust EIN number. With my luck I would get caught if I didn’t report it. I explained the situation on the CSS and, after I see the various financial aid packages I may call the schools to discuss. Thank you so much for all of the valuable input and information.</p>
<p>Very interesting piece in the newspaper this morning…the daughter of Jack Kent Cooke (very wealthy guy, scholarships offered in his name from a foundation, etc) has a 19 year old daughter to whom he left a $5 million dollar trust. She only gets some income, $200k since age 9, so maybe $20k annually?</p>
<p>She was thrown out of SMU for non-payment of tuition, George Wasginton is offering her a spot INCLUDING FINANCIAL AID…how can they do that if she has a $5,000,000 trust fund???</p>
<p>The article I read said that Jacqueline Cook did NOT qualify for finaid because of the trust. Also, I was troubled by the fact that she gets $50,000 a year from the trust and her mother said “that was supposed to be her walking around money”. Maybe it’s me, but $50,000 is a lot of “walking around money” for a 19 year old. Perhaps some of that should have been used for her tuition…Geez even the FAFSA would expect 30% of her assets to be used for college expenses.</p>
<p>Thumper, interesting which factoids the various papers leave out…perhaps no finaid at SMU due to a trust fund asset? Then maybe GeoWa is offering institutional aid for some reason all their own???</p>
<p>My paper said she had received $200k total since the trust began at age 9, so I was guessing $20k annually, but if it was only paying out recently, then Miss Cooke is perhaps not so good with $ and should have used that $50k annually for her education and living not so large expenses and not so much “walking around” That could be tough at SMU, I think there is a pretty high standard of living amongst students there.</p>
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<p>Not to be insensitive, but that ought to be one of the worst decisions ever made. It does seem that your deceased parent received extremely bad advice, including the attempt “to keep colleges from getting my money.” When it comes to financial aid, the primary responsibility falls on the shoulder of the family. </p>
<p>If the current attorneys and trustees were also involved with the creation of that abomination, I’d think about taking the documents to a different lawyer to investigate the possibility of removing the current “advisors” or uncovering escape clauses. </p>
<p>The issue here is not that the trusts do not help you, but in fact place you in a very difficult situation. You might indeed be “screwed” but not by FAFSA!</p>
<p><a href=“http://www.washingtonpost.com/wp-dyn/content/article/2007/01/25/AR2007012501952.html[/url]”>http://www.washingtonpost.com/wp-dyn/content/article/2007/01/25/AR2007012501952.html</a></p>
<p>more details…not that this helps the OP, but WHY is the disbursement from the trust taxable? Wouldn’t the trust already be paying income taxes on all the income earned by the investments of the trust?</p>
<p>Wouldn’t the $50,000 be considered the girl’s income. And isn’t her mother still responsible for her?
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