Hello- hoping for some advice. I recently received inheritance of about $75,000. How can I invest it so that it doesn’t hurt my daughters financial aid? My daughters school requires “PD-175A”. Thank you!
Profile PD-175A is qualified retirement savings account balances. Unless your balances are crazy high, this data is used for information purposes only, to view how much you have in qualified retirement savings in the context of your overall financial picture. So, you could invest as much of the $75k inheritance as possible in qualified retirement accounts and it would probably have no affect on your daughter’s financial aid, but unless you are self-employed you probably won’t be able to shelter more than half the amount before you have to submit financial aid forms again.
How about a nice “investment” in philanthropy? If you donate the money to a legitimate tax exempt organization that does good works for the less fortunate, you won’t have the asset to report for financial aid anymore, and you can get a nice tax write off and feel good about yourself at the same time! Just make sure you pick a charity that uses most of their donations to directly support their mission (i.e., 50% of their budget isn’t spent on fundraising).
You may hear other advice to invest in life insurance or annuities, or a combination of the two, but I think that’s a bad idea. Better to take the hit with financial aid on having the asset reportable, and earn a safer return with a lower cost investment.
You can put a certain amount per year in qualified retirement accounts.
Would you consider using some of that money for college costs? Assets in your bank account are assessed at on,y 5.6% of their value for FAFSA purposes…which isn’t a lot. On $75,000, that would only add $4200 to your EFC.
Without That $75,000, would you be eligible for a Pell Grant?
Have you run the net price calculator both with and without that $75,000 in the bank? What is the difference in net costs when you do that?
Need based aid is mostly calculated using income…with assets contributing some. If the college doesn’t meet full need…or your income is above a threshold, doing financial gymnastics mig nit matter…at all.
Do you have credit card debt and/or medical debt to pay down?
Parent Plus loans?
Car loans, your own college debt? Previous year college debt for your child?
Yes, paying off debt, if you have any, is a great idea. A small number of Profile schools do not consider primary home equity in the financial aid process, so if your daughter goes to one of those schools and you have a mortgage on your primary residence, paying it down or off would be an excellent way to shelter the inheritance.
$75,000 can go pretty fast. Consider first paying down any debt (credit cards, medical) and then pre-paying fixed expenses such as utilities, rent, insurance policies, etc. Make sure that you have enough life insurance to cover the cost of education should you die while your child is in school.
You can also use some of the money to purchase online balances such as a large gift card from Amazon which allows you to pre-pay a lot of regular expenses. It might be time to upgrade cars or leases. Of course, if you do pre-pay a lot of expenses you will have more disposable income that would be best saved or used to pay for college so it might be a zero sum game in the end.
I don’t understand. If you have need based aid and came into a chunk of money that reduces your need, why wouldn’t you use it to pay for college?
We had a similar inheritance when our kiddo was a college freshman. It was from his grandma. She would have wanted all if it to go for college costs for her grandchildren. But really…only $4500 a year was added to our family contribution per FAFSA. But for us…that didn’t matter anyway…as we were full pay for college anyway (minus some merit awards our kids received)
Like I said…run the net price calculator for,the college both with and without that inheritance as an asset. What is the difference?