Irrevocable Trusts impact on FA?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Hey I got news everyone - it's the professionals push that we should subsidize FA with the fund. Not us. That's why I'm asking!

Seriously - $1M is not a lot of money. If we tap it for 6 yrs of school + college, they have very little at age 25. The question is whether we should tap it for education at all given that we are receiving FA. The banks tell us we should most definitely protect the money as much as possible but still use it if it takes the pressure off us financially as there is actually a reason we receive FA. Even with FA, we struggle. It's not like we are millionaires. I like how you all think it's our money but it isn't. We would really like our kids to benefit as much as possible with it. However it's education and kinda the definition of benefit at this time. I think if any of of you were in this our position you would be wrestling with whether to use it on education or not, it's much easier to sit in judgement, I get that.

And to the idiot that wonders ow I know my kids are beneficiaries since I was estranged from my mom - hey Sherlock - as guardian of the beneficiaries, I'm legally bound to be told. You are a moron for even asking this question! We do have to find a 3rd party Trustee long-term once the estate is settled thus we are not in control of any of this money but hey, according to these "professionals," we should leverage the fund to our benefit as a family.

I will no longer be reviewing this thread as none of you have experience obviously.

$1M is not a lot of money? Are you serious? There are kids who have nothing. Not even 1k in a bank account. There are so many kids who hope to get aid or they can’t go at all. There isn’t infinite aid. Other kids could be turned down for FA that your kids, with trust funds, will get.

Oh, the irony, that OP was, until very recently, one of those people who would not have been able to afford to send their kids to private without FA. Now that they can afford it, they want the FA, too.

[Anonymous]

FYI, OP, for the future: Can't speak to k-12, but trusts, including irrevocable trusts in the minor/beneficiary's name, are considered available assets for college financial aid determination. Given it is the student's asset, a larger percentage of the trust's value will be considered available for college expenses, likely reducing or eliminating financial aid eligibility. Given the value of the trusts being discussed, it is highly unlikely your minor(s) would qualify for any need-based financial aid. Almost all trust funds are counted in the financial aid process, and as an asset of the child in question, they would be subject to anticipated high rate of utilization.

In other words, even if you manage to avoid using funds from the trust for k-12 education, keep in mind they would be subject to disclosure and consideration in the financial aid process for college.

If you and your spouse are in a position to fully pay for college WITHOUT having your student's trust come into play, then this doesn't matter (e.g. can cover without financial aid - don't need to apply for it anyways). But if you were banking on, or need, financial aid for college... be forewarned. College financial aid offices are highly unlikely to exempt trust funds (with HEMS standard) from aid calculation consideration under any circumstances.

[think about it this way...otherwise everyone would put their assets into a trust that disburses to a child post-college graduation and thus their kid could qualify for aid, right?]

[Anonymous]

in a generation skipping trust, the assets are not included in the child’s estate, which effectively protects their estate. They can also retain complete control of their own trust during their lifetime.

[Anonymous]

Anonymous wrote:

Anonymous wrote:If each out your children have $1M - do you think they should get financial aid?

This, 100% this. Why should people with less money than you kids pay for your kids? Just stop it. If you don't want to spend the money on private, then take them out of private. Don't steal that money from hardworking families who are all paying for your kids' financial aid.

This!!!!

[Anonymous]

If the assets aren't available until the age of 25, they're not considered available funds. Owning a 700K home is calculated differently than 700K in your savings. It may still reduce the amount of FA received, just like owning a high value home might.

[Anonymous]

Anonymous wrote:If the assets aren't available until the age of 25, they're not considered available funds. Owning a 700K home is calculated differently than 700K in your savings. It may still reduce the amount of FA received, just like owning a high value home might.

The OP stated that the funds can be used for "medical, emotional, and well being" purposes before turning 25. And that would have to be decided by a third party as well. The OP could do their due diligence to try to use part of the trust for tuition, which would still leave them with hundreds of thousands of dollars left.

[Anonymous]

Anonymous wrote:

Anonymous wrote:If the assets aren't available until the age of 25, they're not considered available funds. Owning a 700K home is calculated differently than 700K in your savings. It may still reduce the amount of FA received, just like owning a high value home might.

The OP stated that the funds can be used for "medical, emotional, and well being" purposes before turning 25. And that would have to be decided by a third party as well. The OP could do their due diligence to try to use part of the trust for tuition, which would still leave them with hundreds of thousands of dollars left.

Meant “educational,” not emotional.

[Anonymous]

The FAFSA no longer asks explicitly about family trusts but the CSS profile
does. Who is the trustee of the trust(s)?

[Anonymous]

Sorry for your loss

You can probably get away with not declaring it for FA, but does that align with the values you want to teach your kids and the values you want the school to teach your kids?

If so, go for it. If not, another two kids may get a chance too

[Anonymous]

Who knew so many altruistic saintly families attended these schools? So lucky to be among such pillars of society!

[Anonymous]

Anonymous wrote:Who knew so many altruistic saintly families attended these schools? So lucky to be among such pillars of society!

Hyperbolic much? Anyone pointing out anything in terms of ethics inevitably gets this response on DCUM. How far removed from ethical discussion are you that you equate altruism, sainthood, and pillars of society with just basic ethics? No one is suggesting OP give all their money away or pay for other kids’ tuition. Just their own. Geez.

[Anonymous]

Anonymous wrote:Hey I got news everyone - it's the professionals push that we should subsidize FA with the fund. Not us. That's why I'm asking!

Seriously - $1M is not a lot of money. If we tap it for 6 yrs of school + college, they have very little at age 25. The question is whether we should tap it for education at all given that we are receiving FA. The banks tell us we should most definitely protect the money as much as possible but still use it if it takes the pressure off us financially as there is actually a reason we receive FA. Even with FA, we struggle. It's not like we are millionaires. I like how you all think it's our money but it isn't. We would really like our kids to benefit as much as possible with it. However it's education and kinda the definition of benefit at this time. I think if any of of you were in this our position you would be wrestling with whether to use it on education or not, it's much easier to sit in judgement, I get that.

And to the idiot that wonders ow I know my kids are beneficiaries since I was estranged from my mom - hey Sherlock - as guardian of the beneficiaries, I'm legally bound to be told. You are a moron for even asking this question! We do have to find a 3rd party Trustee long-term once the estate is settled thus we are not in control of any of this money but hey, according to these "professionals," we should leverage the fund to our benefit as a family.

I will no longer be reviewing this thread as none of you have experience obviously.

On the not so off chance you check this thread. The income on $2m should more than pay for 80% of your educational costs this year, if you take a 4% drawdown - and if it's invested in Index Funds (that have an average annual return of at least 7% for an S&P ETF), you would have money still accruing. Since you were already paying 60% (you said FA covered 40% in past years), you would end up saving about $40k annually. Or you could continue to pay for 50%, save $10k and your kids' trusts would grow even more.

Speak with a financial planner and a lawyer. Speaking as a lawyer, don't trust the advice you receive from companies trying to sell you a service.

[Anonymous]

Anonymous wrote:The FAFSA no longer asks explicitly about family trusts but the CSS profile
does. Who is the trustee of the trust(s)?

As a follow up, if someone died and the parent became the trustee of the trust, then I’d report it on the CSS profile as a parental asset. It’s not the beneficiary’s, like so many people on here are claiming. That’s just legally incorrect.

The parent should only report the amount that is in agreement with the trust rules, not the total value. If the money is locked up and can’t be distributed, it’s as good as not there.

Just remember these docs are a snapshot in time.

If neither of the parents are the trustee(s), then don’t report it at all.

That’s the legal answer. I have no idea what all these people are screaming about. It should all be there in the trust docs, assuming the trust exists and is currently funded. That’s a big assumption.

[Anonymous]

OP, don’t listen to these fools and their screeds about inheritance. Listen to the finance people you are working with. Esp if you aren’t millionaires yourselves.

[Anonymous]

Anonymous wrote:OP, don’t listen to these fools and their screeds about inheritance. Listen to the finance people you are working with. Esp if you aren’t millionaires yourselves.

Ethics are what matter here. Financial aid comes from other families' donations. Why should anyone donate to this family when they could fund themselves?