Inherited IRA

happymomof1
Mon, 29 Jan 2018 15:28:09 +0000

The money that is in the IRA is retirement money, and is invisible to the FAFSA application. She needs to look at her FAFSA and make certain that she did not put this IRA as regular savings. It is my understanding that this IRA is an inheritance, and therefore is not treatable as income.

It is my understanding that because it is an inherited IRA (also called a beneficiary IRA) she will be obligated to take the minimum withdrawals every year. The company that holds the IRA can do the calculations. That is where the $200 comes from. It also is my understanding that an inherited IRA can be cashed out completely with no early-withdrawal penalties if the person so desires, but that is something that would need to be investigated carefully.

She has to have earned income of her own in order to start her own IRA. She can’t just use the $200 from the inherited IRA for that.

No, the financial aid office cannot insist that she use all of her inheritance to pay for her education. However, they can fail to award her any federal financial aid that she qualifies for because of their own disorganization or neglect, and she might find she has difficulties in paying for her studies. If she is not to far into her program and has other options of places to study, she might consider doing that.

@kelsmom is a financial aid officer who may have good information for you.