I have an uncle who is developmentally disabled. He has lived with my mom for many years. Because my mom is lower income and has no retirement saved, my sister and I have been putting money aside for many years in the event that my uncle and/or she might need it some day. She does not know about it (yet) and we have accumulated a substantial amount.
Now my daughter is heading off to college in two years and I’m realizing half the money in this joint account may be considered “my” money even though it is intended for my uncle/mom. I am debating the best way to handle the money now so it does not affect our ability to get financial aid. One thought is to simply give it to my mom now and warn her that it’s not for spending, it’s for emergencies. However, my mom tends to be impulsive (compulsive) when it comes to money, and my sister and I are concerned she would find an “emergency” that would, in her mind, require use of the money (home decoration upgrade to “increase the value” of her home, vacation for my uncle who has a chronic illness, etc… this is why she has no retirement). We could also give it to her to pay down her mortgage, which would hopefully give her some safety there, although she tends to use her equity line a lot for “emergencies”. I’m not sure if there are other options – there are no other relatives that we could entrust the money to. Any thoughts would be appreciated.
Could you put it in a trust and make yourselves the trustee with your mom and uncle the beneficiaries? This would make the money earmarked for them but you would have control on how it is spent. (Of course you’ll have to spend a little of it to hire a lawyer to set it up and for the legal advice which I’m certainly not qualified to give!)
Could you put the account in your sister’s name?
How much is your half? Can you gift your half to your sister $14k in 2015, $14k in 2016 and $14k in early 2017 before the FAFSA and Profile are filed?
What is your AGI? Would you qualify for need-based aid without this account?
Put the money in your sister’s name and maybe some other trusted relative.
Could you put it in an annuity in your mom’s name that pays out a monthly income to her at a specified age?
Not sure if that can be set up for another person?
But she will have access to the money eventually and you might not be able to control how she spends it.
This is what trusts are for. Just set up an irrevocable trust, making your sister & yourself co-trustees, your mom & uncle beneficiaries. The trust terms should give you & your sister discretion to spend for necessities of life, etc. Just be aware that doing that may make it difficult if you later want to qualify your uncle or mom for services such as Medicaid.
Definitely worth getting legal advice if you can.
Before you do all of these financial gyrations, run the Net Price Calculators for the places that are currently on your child’s list, with and without the joint account. Unless you are truly low income and have no savings outside of retirement accounts other than this joint account, there is every possibility that this account won’t affect your costs all that much anyway - they will be equally shockingly high.
You could contact the elder and disabled county services department and ask what would be the best way to serve your mom and uncle. These agencies often have referrals to attorneys who specialize in these areas, or, the county services may have their own “in-house” counsel.
What about a special needs trust for the uncle with half of the money?
You really need an attorney who is an elder-care specialist (they normally handle special needs trusts for people of any age) to make sure you’re setting up things in the most helpful way.
(And what a good person you are to have so carefully build that up for them.)