BrettW Posted August 14, 2019 Share Posted August 14, 2019 In trying to complete the FAFSA application for the first time, I've run up on a question concerning "parent assets" that I'm not sure how to think about. I'm hoping that someone here might have some insight/advice. Sorry this is a bit detailed. Here's the background: My husband's grandmother set up a trust before she passed (many years ago) which contains her home on the coast of Maine and a couple of mutual funds which are used to pay expenses and taxes each year on the home. The trust established 3 heirs (or beneficiaries) which were her children. One of her "children" was my husband's father. When he passed away about 10 years ago, his 1/3 was passed to my husband and another sibling. So....my husband now has 1/6th share. The trust is in the name of the grandmother but every year when mutual funds are sold to pay taxes, 1/6th of the capital gains distributions/income, is added to our (my husband and myself) tax return because my husband is now a beneficiary. Usually it's a couple of thousand dollars. So, my question is this: do we need to include 1/6 of the value of the house and 1/6 of the value of the mutual funds as "parent assets" on the FAFSA? I've asked a financial advisor and my CPA and got somewhat conflicting answers. I know that trusts are often misused and are therefore treated with some suspicion, but this isn't something we set up to "hide" assets. It's been in my husband's family for many years. The rules on the fafsa website say it is "straightforward" about who should claim a assets in a trust. However, in our case they seem contradictory. One rule says: If the trust is in the name of the parent, spouse or student they should be included (the trust is not in his name, but he is now a beneficiary) . Another rule says: whoever pays the taxes is the owner of the trust. As far as the house is concerned, the trust itself pays the taxes (property taxes, etc...). But my husband (as a "beneficiary") does seem to have to pay capital gains on the mutual funds. So now I'm confused. Adding extra assets will, I assume, make it less likely for our daughter to qualify for aid and could drive up our EFC, correct? The assets in this trust are not something we (my husband and I) can "sell" or "use" to pay for college. There are lot of other family members involved. I want to try to do this correctly and count the things we're supposed to count, but I don't want to add assets needlessly. I'm just not sure. Any thoughts? Quote Link to comment Share on other sites More sharing options...
8filltheheart Posted August 14, 2019 Share Posted August 14, 2019 I'm not positive, but I think you need to include it. Is this a FAFSA only school? Does it meet need? For most non-meeting need schools, it is unlikely to make a difference. For most meets need schools, you will have to fill out the CSS Profile and it will definitely need to be included. 2 Quote Link to comment Share on other sites More sharing options...
freesia Posted August 14, 2019 Share Posted August 14, 2019 I would agree with 8. We live in housing provided for my my dh's job. We cannot sell or use the assets either, but the fair market rent is included as income for us when figuring the FAFSA. We also cannot live somewhere "cheaper" to access extra funds. So being able to use the money isn't the definition of whether something counts as income. We did write letters to the individual colleges, which did help in some cases. My guess would be that you need to count it bc I would think you could sell your share of the house to someone, right? Hopefully someone will weigh in who has more experiences. Quote Link to comment Share on other sites More sharing options...
Another Lynn Posted August 16, 2019 Share Posted August 16, 2019 (edited) On 8/14/2019 at 9:31 AM, freesia said: I would agree with 8. We live in housing provided for my my dh's job. We cannot sell or use the assets either, but the fair market rent is included as income for us when figuring the FAFSA. We also cannot live somewhere "cheaper" to access extra funds. So being able to use the money isn't the definition of whether something counts as income. We did write letters to the individual colleges, which did help in some cases. My guess would be that you need to count it bc I would think you could sell your share of the house to someone, right? Hopefully someone will weigh in who has more experiences. This is different because it's income, not assets. Counting it as income makes sense from an accounting and tax perspective. But the trust, I'm not sure about. And if CPAs and financial advisors don't agree, who else is there to consult? This website might be helpful. Though it does not address if a trust is for the benefit of more than one person, it does say trusts are reportable assets, fwiw. I know nothing about the accuracy of the information, but the article is about sheltering assets from the FAFSA.... https://www.cappex.com/articles/money/how-to-shelter-assets-on-the-fafsa Edited August 16, 2019 by Another Lynn 1 Quote Link to comment Share on other sites More sharing options...
8filltheheart Posted August 16, 2019 Share Posted August 16, 2019 42 minutes ago, Another Lynn said: This is different because it's income, not assets. Counting it as income makes sense from an accounting and tax perspective. But the trust, I'm not sure about. And if CPAs and financial advisors don't agree, who else is there to consult? This website might be helpful. Though it does not address if a trust is for the benefit of more than one person, it does say trusts are reportable assets, fwiw. I know nothing about the accuracy of the information, but the article is about sheltering assets from the FAFSA.... https://www.cappex.com/articles/money/how-to-shelter-assets-on-the-fafsa The gov't won't care. 😥 We consulted multiple accountants trying to understand our tax responsibilities when our ds was awarded full scholarship. Not a single one knew the answer. I ended up getting more reliable information from the FA forum on College Confidential. (Not joking.) OP, CC might be a place to ask your question. THere are several reliable posters on there who do answer complicated FA questions. (At least there used to be before their update. I have been avoiding their forums since the update, but hopefully you will find them still hanging out there.) 3 Quote Link to comment Share on other sites More sharing options...
G5052 Posted August 16, 2019 Share Posted August 16, 2019 I think this might help: https://www.savingforcollege.com/article/how-do-trust-funds-affect-financial-aid-for-college My estate lawyer actually mentioned a situation like this in passing and said what this guy said. Of course, YMMV. Tax and financial aid stuff is no fun. I dread the FAFSA every year. Thankfully only one kid left to do it for. 3 Quote Link to comment Share on other sites More sharing options...
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