<p>Wow, sorry for your loss. What a tough situation regardless of the money part.</p>
<p>What Chardo said is partly true - once you file the death claim with the insurance co. it’s your money, regardless of whether it’s with the insurance co. or moved to a different account. Now, technically it’s NOT your money until you file for it, so not sure if that’s been done yet but you’ll need to within whatever period the Ins. Co. says. </p>
<p>However, you ARE allowed to disclaim any inheritance so assuming you are the primary beneficiary, you can disclaim whatever portion you choose. The caveat is that you do NOT get to decide who then gets the rest - it goes to the secondary beneficiary(s) or the estate if none are listed. Usually, the 2ndary benes would be the kids anyhow so I doubt that would help you much for college aid.</p>
<p>The insurance co. may offer other settlement options rather than “lump sum”. An annuity; a 5-year payout; etc. However, be careful here as to which would allow you to include or not include the part not yet paid out on FAFSA or Profile if your kids’ schools use it. </p>
<p>I guess you could gift the $$$ to the older son - but man, that’s going pretty far to avoid including it on aid apps. Also, as far as ethical goes, that’s a tough one. You’re in a tough situation, however, many parents have the life insurance to cover this situation - where the kids aren’t through college yet and will need the $$$ to finish. </p>
<p>Good luck.</p>