<p>Has the parent already died? </p>
<p>A portion of the insurance will likely go towards funeral costs, medical bills, and keeping the family afloat while mom finds employment. </p>
<p>I think it might be best in the long run for the student to take a gap year because then the money will all be gone and the only income will be mom’s income.</p>
<p>That said, if the payout won’t be reported as untaxed income and she can pay off the debts before she files FAFSA. She could have several months of living expenses before she files FAFSA, so those savings would be gone as well.</p>
<p>BTW…funeral costs can really get out of hand (been thru 2 in the last 18 months). Encourage her to be conservative in this area. Certainly her H would prefer that she preserve as much as possible for their living expenses until the wife can find full employment.</p>