<p>Another student’s issue that I need your help on!
In the divorce settlement, that student’s NCP kept the house. It was thus considered fair
that he provides with an equivalent housing option to his former wife. He thus bought
her an apartment and she now pays back a “rent” of 2/3 of monthly mortgage payments,
until half the value of the house is reached. The NCP pays the remaining 1/3 mortgage
and when the value of the house is reached the house will become the wife’s.
How do you explain that on the CSS Profile? </p>
<p>Assets are given on the financial apps as snapshots. You can have $100K in the bank one day that can get assessed as an asset fully, and the next day it’s gone–you went on a shopping spree, pre paid for some cruises, gave money to your sister, or just burned in the fireplace, and on that day it’s a big fat zero. So you get rid of the UNTILS in the case. </p>
<p>The NCP owns in his name a house that most PROFILE schools want included in his assets less any liens, mortgages against it, so that has to be reported as his primary residence. The apartment he ought for his ex is investment property and it current market value is reported, again less any outstanding mortgage, loan, as an asset of his. The ex who lives in the house pays rent, no quotes needed to her ex which has to be reported as rental income by the ex . Any future situations are not relevant.</p>
<p>What’s stupid here, is if the NCP is paying child support, the custodial parent, the mom has to report that as income on both FAFSA and PROFILE. If she is then turning around and paying him rent, that is income to him that is so reported on PROFILE. Income is very heavily hit in the financial aid apps, and this family is getting double whammied. If some agreement could be made so that the child support is offset by the rent, then mom would not have to report the child support except in excess of the rent, and dad would not have to report the rent, again, except in excess. Some how, some attorney might be able to bundle this all into some agreement so that people are not being double whammied. The dad should be reporting the rent on his tax returns as well and paying taxes on that the way it’s now set up.</p>
<p>But then from what I’ve seen from a lot of settlements between divorced parents, former couples, they often take a lot of liberty with each other’s finances as well as other things. THey don’t get it a lot of time that there is now a wall and that an ex spouse is not a spouse at all, just another person in terms of things. My eyebrows have gone waaay up on how some tax, reporting, business dealings are done that are just plain illegal if ever brought to light. So who knows if some sleight of hand isn’t being done here already, and if the the income isn’t even being reported. </p>
<p>I have a friend who engineered an agreement with her very well to do spouse that netted her kids over $150K in aid including full PELLS She just lived off of her HELOC while the kids were in college–had very little income, no child support, nothing. Under separate contract she got money after they were done with college and a $100K bonus for working with spouse that way, courtesy of the the US government and some college financial aid. They love every bit of how they saved all of that money legally.</p>
<p>^^That separate agreement was actually an asset she should have been claiming. No different than a deferred annuity from an insurance settlement - it has value when she is holding it and should be reported as an asset. Maybe FAFSA didn’t require it, but it sounds like she got a lot more than the Pell.</p>
<p>It may well be “rent,” not rent. The arrangement sounds a lot more like a transfer incident to divorce than a straight rental agreement. Without seeing the divorce decree, I don’t think any of us could know for sure.</p>
<p>Yes, it is an asset (other real estate owned) – must report asset and income, but can also net out debt on the property (if any) and costs associated with the property. However, I would document the situation and ask for consideration since it was part of a divorce arrangement. Might need to supply the divorce agreement page relevant to this.</p>
<p>I am not a tax expert and generally refrain from any tax advice here since I don’t know squat other than by the book. Hopefully the lawyers and accountants are on this The way these things are interpreted most of the time on the forms is by how they are presented on the tax returns, and those are often linked and verified. Some things on FAFSA and PROFILE are distinctly different from how they are done on the returns, and those specific differences are noted in verifications. If the rent is “rent’” and not reported as rent on the tax returns, there won’t be questions raised most likely BUt if it is, and not included on the FAFSA and PROFILE, there will likely be inquiries about it. </p>
<p>Thank you!
I’ll tell this all to the parents. It seemed such a peculiar situation I didn’t know what to say!
:)</p>
“I have a friend who engineered an agreement with her very well to do spouse that netted her kids over $150K in aid including full PELLS She just lived off of her HELOC while the kids were in college–had very little income, no child support, nothing. Under separate contract she got money after they were done with college and a $100K bonus for working with spouse that way, courtesy of the the US government and some college financial aid. They love every bit of how they saved all of that money legally.”
Crappy! What is legal isn’t necessarily moral or ethical.