FA Question: Inherited house, now worth $1M, now what?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This looks like a loop hole. Completely ridiculous that if someone inherits a million dollars vs a million dollar house they would get aid. The system is broken.

Again, this attitude demonstrates both a lack of knowledge about how FA works and a fair bit of hypocrisy. Do you own a house? Are you selling it to pay for college?

Also, the OP did not inherit a $1m home. She inherited a home worth much less than that. If it were in southern CA, it might be worth less now than it was when she inherited it. Assuming you own a home in the DC area, the same housing market that has pushed the value of her home so high gas also benefitted you.

possibly. but if the home is worth 1M now it means that it is larger, closer in/shorter commute with better schools than most homes where the rest of us live. OP and her family have had it better than vast majority of others, including many who earn more (and arguably, deserve it more). it seems unfair that she should get so much aid.

So what you are saying is you are resentful because someone with a lower income hasn't suffered enough?

financial aid is a limited resource and should be distributed based on need. it is ridiculous to argue that those who have all their (substantial) wealth tied in real estate are somehow more needy than others who have less wealth.

Remember though that is not just the primary residence that receives some special treatment under the financial aid formulas. Retirement accounts--which are generally the province of families with incomes in the upper middle class and upper ranges--aren't counted at all towards financial aid. This certainly could be perceived as unfair. If you believe that OP should sell her house and use the equity to pay for college, shouldn't those of us with retirement savings also be required to cash those out for college?

And if you believe that OP should sell her house and use the equity to pay for college, why don't you believe that ALL of us should do this? Couldn't you free up a lot of cash for college if you sold your home? Why aren't you planning to do so?

And if your issue is that this family shouldn't be living in such a valuable home given their income level, that they should have sold the house, bought something more "in line" with their standard of living, and banked the cash for college, well, why do you get to make that determination? I mean, maybe if I closely examined your family's finances, I might argue that you have too much of *your* wealth tied up in real estate as well, that instead of buying a house worth $x, you should have sucked it up and bought a smaller home in a less desirable area and put the savings in college accounts. But if I said that to you, you'd tell me that to piss off. And you'd be right.

i don't think OP should sell the house to pay for college. i think that would be pretty idiotic. that said, i don't think she should get financial aid either.

So, what should she do, pray tell? She shouldn't sell her home, because that would be idiotic, as you say. But if she can't reasonably be expected to sell her home, if the equity of the home is not a liquid asset available for college, then why isn't her kid just as needy as any other kid from a family of 6 with a HHI of $100k?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This looks like a loop hole. Completely ridiculous that if someone inherits a million dollars vs a million dollar house they would get aid. The system is broken.

Again, this attitude demonstrates both a lack of knowledge about how FA works and a fair bit of hypocrisy. Do you own a house? Are you selling it to pay for college?

Also, the OP did not inherit a $1m home. She inherited a home worth much less than that. If it were in southern CA, it might be worth less now than it was when she inherited it. Assuming you own a home in the DC area, the same housing market that has pushed the value of her home so high gas also benefitted you.

possibly. but if the home is worth 1M now it means that it is larger, closer in/shorter commute with better schools than most homes where the rest of us live. OP and her family have had it better than vast majority of others, including many who earn more (and arguably, deserve it more). it seems unfair that she should get so much aid.

So what you are saying is you are resentful because someone with a lower income hasn't suffered enough?

financial aid is a limited resource and should be distributed based on need. it is ridiculous to argue that those who have all their (substantial) wealth tied in real estate are somehow more needy than others who have less wealth.

Remember though that is not just the primary residence that receives some special treatment under the financial aid formulas. Retirement accounts--which are generally the province of families with incomes in the upper middle class and upper ranges--aren't counted at all towards financial aid. This certainly could be perceived as unfair. If you believe that OP should sell her house and use the equity to pay for college, shouldn't those of us with retirement savings also be required to cash those out for college?

And if you believe that OP should sell her house and use the equity to pay for college, why don't you believe that ALL of us should do this? Couldn't you free up a lot of cash for college if you sold your home? Why aren't you planning to do so?

And if your issue is that this family shouldn't be living in such a valuable home given their income level, that they should have sold the house, bought something more "in line" with their standard of living, and banked the cash for college, well, why do you get to make that determination? I mean, maybe if I closely examined your family's finances, I might argue that you have too much of *your* wealth tied up in real estate as well, that instead of buying a house worth $x, you should have sucked it up and bought a smaller home in a less desirable area and put the savings in college accounts. But if I said that to you, you'd tell me that to piss off. And you'd be right.

i don't think OP should sell the house to pay for college. i think that would be pretty idiotic. that said, i don't think she should get financial aid either.

So, what should she do, pray tell? She shouldn't sell her home, because that would be idiotic, as you say. But if she can't reasonably be expected to sell her home, if the equity of the home is not a liquid asset available for college, then why isn't her kid just as needy as any other kid from a family of 6 with a HHI of $100k?

because she could actually move to a chaper house, like those where other 100k students live. those other students don't have that option. i don't think OP should excercise that option, and i would certainly not do it in her place, but her kid's situation and those of other 100k students are very, very different.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This looks like a loop hole. Completely ridiculous that if someone inherits a million dollars vs a million dollar house they would get aid. The system is broken.

Again, this attitude demonstrates both a lack of knowledge about how FA works and a fair bit of hypocrisy. Do you own a house? Are you selling it to pay for college?

Also, the OP did not inherit a $1m home. She inherited a home worth much less than that. If it were in southern CA, it might be worth less now than it was when she inherited it. Assuming you own a home in the DC area, the same housing market that has pushed the value of her home so high gas also benefitted you.

possibly. but if the home is worth 1M now it means that it is larger, closer in/shorter commute with better schools than most homes where the rest of us live. OP and her family have had it better than vast majority of others, including many who earn more (and arguably, deserve it more). it seems unfair that she should get so much aid.

So what you are saying is you are resentful because someone with a lower income hasn't suffered enough?

financial aid is a limited resource and should be distributed based on need. it is ridiculous to argue that those who have all their (substantial) wealth tied in real estate are somehow more needy than others who have less wealth.

Remember though that is not just the primary residence that receives some special treatment under the financial aid formulas. Retirement accounts--which are generally the province of families with incomes in the upper middle class and upper ranges--aren't counted at all towards financial aid. This certainly could be perceived as unfair. If you believe that OP should sell her house and use the equity to pay for college, shouldn't those of us with retirement savings also be required to cash those out for college?

And if you believe that OP should sell her house and use the equity to pay for college, why don't you believe that ALL of us should do this? Couldn't you free up a lot of cash for college if you sold your home? Why aren't you planning to do so?

And if your issue is that this family shouldn't be living in such a valuable home given their income level, that they should have sold the house, bought something more "in line" with their standard of living, and banked the cash for college, well, why do you get to make that determination? I mean, maybe if I closely examined your family's finances, I might argue that you have too much of *your* wealth tied up in real estate as well, that instead of buying a house worth $x, you should have sucked it up and bought a smaller home in a less desirable area and put the savings in college accounts. But if I said that to you, you'd tell me that to piss off. And you'd be right.

i don't think OP should sell the house to pay for college. i think that would be pretty idiotic. that said, i don't think she should get financial aid either.

So, what should she do, pray tell? She shouldn't sell her home, because that would be idiotic, as you say. But if she can't reasonably be expected to sell her home, if the equity of the home is not a liquid asset available for college, then why isn't her kid just as needy as any other kid from a family of 6 with a HHI of $100k?

because she could actually move to a chaper house, like those where other 100k students live. those other students don't have that option. i don't think OP should excercise that option, and i would certainly not do it in her place, but her kid's situation and those of other 100k students are very, very different.

Again, I just think it is bizarre that people are reacting so strongly to this. You people are acting like people's finances are always cut and dried, and that this falls into some wacky loophole. The whole system is riddled with loopholes (I'll mention again that pesky exemption for retirement accounts that I bet benefits most of the posters here), but somehow this one seems so offensive? What if this family hadn't been left a house but instead had been left money that OP had used for k-12 education for all 4 kids at one of the area's pricey privates? The money would be mostly gone now, this family would qualify for FA, but these kids' situation and those of other 100k students would still be very, very different. (Much more different, I would argue, than they currently are.) So what? What about all those people out there whose parents helped them buy their house, or pay for private education? You think they don't have an advantage that others in their income bracket don't? Of course they do. There are exceptions and loopholes and unintended consequences everywhere.

Maybe you think OP should have said "no, thanks" to the inheritance? Let it go to her second cousin instead. You think that would have been smart? Because at base you are still saying that she should choose between the house and the FA. She can have one or the other but not both, according to you. Yet we acknowledged above that she would be an idiot to sell her house, I assume you think she would have been an idiot to turn it down in the first place. So you have her in a no win situation. She's an idiot if she doesn't take/keep the house, but she's gaming the system if she gets FA, even though she can't get any money out of the house unless she sells it.

Your position makes no sense.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This looks like a loop hole. Completely ridiculous that if someone inherits a million dollars vs a million dollar house they would get aid. The system is broken.

Again, this attitude demonstrates both a lack of knowledge about how FA works and a fair bit of hypocrisy. Do you own a house? Are you selling it to pay for college?

Also, the OP did not inherit a $1m home. She inherited a home worth much less than that. If it were in southern CA, it might be worth less now than it was when she inherited it. Assuming you own a home in the DC area, the same housing market that has pushed the value of her home so high gas also benefitted you.

possibly. but if the home is worth 1M now it means that it is larger, closer in/shorter commute with better schools than most homes where the rest of us live. OP and her family have had it better than vast majority of others, including many who earn more (and arguably, deserve it more). it seems unfair that she should get so much aid.

So what you are saying is you are resentful because someone with a lower income hasn't suffered enough?

financial aid is a limited resource and should be distributed based on need. it is ridiculous to argue that those who have all their (substantial) wealth tied in real estate are somehow more needy than others who have less wealth.

Remember though that is not just the primary residence that receives some special treatment under the financial aid formulas. Retirement accounts--which are generally the province of families with incomes in the upper middle class and upper ranges--aren't counted at all towards financial aid. This certainly could be perceived as unfair. If you believe that OP should sell her house and use the equity to pay for college, shouldn't those of us with retirement savings also be required to cash those out for college?

And if you believe that OP should sell her house and use the equity to pay for college, why don't you believe that ALL of us should do this? Couldn't you free up a lot of cash for college if you sold your home? Why aren't you planning to do so?

And if your issue is that this family shouldn't be living in such a valuable home given their income level, that they should have sold the house, bought something more "in line" with their standard of living, and banked the cash for college, well, why do you get to make that determination? I mean, maybe if I closely examined your family's finances, I might argue that you have too much of *your* wealth tied up in real estate as well, that instead of buying a house worth $x, you should have sucked it up and bought a smaller home in a less desirable area and put the savings in college accounts. But if I said that to you, you'd tell me that to piss off. And you'd be right.

i don't think OP should sell the house to pay for college. i think that would be pretty idiotic. that said, i don't think she should get financial aid either.

So, what should she do, pray tell? She shouldn't sell her home, because that would be idiotic, as you say. But if she can't reasonably be expected to sell her home, if the equity of the home is not a liquid asset available for college, then why isn't her kid just as needy as any other kid from a family of 6 with a HHI of $100k?

because she could actually move to a chaper house, like those where other 100k students live. those other students don't have that option. i don't think OP should excercise that option, and i would certainly not do it in her place, but her kid's situation and those of other 100k students are very, very different.

Again, I just think it is bizarre that people are reacting so strongly to this. You people are acting like people's finances are always cut and dried, and that this falls into some wacky loophole. The whole system is riddled with loopholes (I'll mention again that pesky exemption for retirement accounts that I bet benefits most of the posters here), but somehow this one seems so offensive? What if this family hadn't been left a house but instead had been left money that OP had used for k-12 education for all 4 kids at one of the area's pricey privates? The money would be mostly gone now, this family would qualify for FA, but these kids' situation and those of other 100k students would still be very, very different. (Much more different, I would argue, than they currently are.) So what? What about all those people out there whose parents helped them buy their house, or pay for private education? You think they don't have an advantage that others in their income bracket don't? Of course they do. There are exceptions and loopholes and unintended consequences everywhere.

Maybe you think OP should have said "no, thanks" to the inheritance? Let it go to her second cousin instead. You think that would have been smart? Because at base you are still saying that she should choose between the house and the FA. She can have one or the other but not both, according to you. Yet we acknowledged above that she would be an idiot to sell her house, I assume you think she would have been an idiot to turn it down in the first place. So you have her in a no win situation. She's an idiot if she doesn't take/keep the house, but she's gaming the system if she gets FA, even though she can't get any money out of the house unless she sells it.

Your position makes no sense.

Not the person you're arguing with, but - wtf? I haven't seen anyone saying she shouldn't have accepted the house. But your argument that only liquid assets are real assets, and that somehow OP is in a no-win position is just bizarre.

Hint: owning a million-dollar asset may not be "winning" but it's a good start. OP not being able to have that AND a discounted private education is hardly a story worth sobbing over.

[Anonymous]

23:22 Your points are not persuasive. If they'd invested in private schools, then their net worth would not be over $1 million and yes they should be eligible for FA. Of course OP should not have turned down the house.

People's reactions are strong here because of perceived inequities and a distorted sense of entitlement. As for loopholes, what examples can you give on this magnitude?

Questions from folks with high HHI and large mortgages and graduate school loans who expect FA at private school get a strong reaction over on the private school forum. This is not new..

[Anonymous]

To me, it's very simple. There is a limited pool of financial aid to go around, and it should go to those with the most need. Because of your assets, you are not in the most need. You may not want to take out an equity line on your home, but it is an option for you, unlike many families who also want to send their kids to school. Don't start looking for handouts until you've exhausted your own ability to pay.

[Anonymous]

Anonymous wrote:23:22 Your points are not persuasive. If they'd invested in private schools, then their net worth would not be over $1 million and yes they should be eligible for FA. Of course OP should not have turned down the house.

People's reactions are strong here because of perceived inequities and a distorted sense of entitlement. As for loopholes, what examples can you give on this magnitude?

Questions from folks with high HHI and large mortgages and graduate school loans who expect FA at private school get a strong reaction over on the private school forum. This is not new..

Not PP, but this family does not have a high HHI, so the comparison is not very apt.

And as for loopholes, hasn't PP given the example of retirement accounts over and over again? If OP had a million in a retirement account, none of it would be counted towards financial aid, and the expected family contribution would be even lower (since a portion of the home equity *does* count).

[Anonymous]

Anonymous wrote:

Anonymous wrote:23:22 Your points are not persuasive. If they'd invested in private schools, then their net worth would not be over $1 million and yes they should be eligible for FA. Of course OP should not have turned down the house.

People's reactions are strong here because of perceived inequities and a distorted sense of entitlement. As for loopholes, what examples can you give on this magnitude?

Questions from folks with high HHI and large mortgages and graduate school loans who expect FA at private school get a strong reaction over on the private school forum. This is not new..

Not PP, but this family does not have a high HHI, so the comparison is not very apt.

And as for loopholes, hasn't PP given the example of retirement accounts over and over again? If OP had a million in a retirement account, none of it would be counted towards financial aid, and the expected family contribution would be even lower (since a portion of the home equity *does* count).

I don't think that's accurate. I believe a graded percentage of retirement accounts are shielded, with the percentage being larger the closer the parents are to retirement age.

I'd be in favor of doing the same for real estate. Everyone needs a place to live. No one needs a $1m house.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:23:22 Your points are not persuasive. If they'd invested in private schools, then their net worth would not be over $1 million and yes they should be eligible for FA. Of course OP should not have turned down the house.

People's reactions are strong here because of perceived inequities and a distorted sense of entitlement. As for loopholes, what examples can you give on this magnitude?

Questions from folks with high HHI and large mortgages and graduate school loans who expect FA at private school get a strong reaction over on the private school forum. This is not new..

Not PP, but this family does not have a high HHI, so the comparison is not very apt.

And as for loopholes, hasn't PP given the example of retirement accounts over and over again? If OP had a million in a retirement account, none of it would be counted towards financial aid, and the expected family contribution would be even lower (since a portion of the home equity *does* count).

I don't think that's accurate. I believe a graded percentage of retirement accounts are shielded, with the percentage being larger the closer the parents are to retirement age.

I'd be in favor of doing the same for real estate. Everyone needs a place to live. No one needs a $1m house.

This is not correct. A graded percentage of non-retirement account assets are shielded, with the percentage being larger the closer the parents are to retirement age. Money in retirement accounts (401k, 403b, Roth, IRA, TSP, etc) is excluded entirely. The only portion of retirement monies that are counted is the amount you contributed in the last year. So, IOW, you cannot decide this year to put $250k into your retirement accounts in order to shield it from next year's financial aid calculation. However, if you already had $250k in retirement accounts prior to the last year, NONE of it counts towards financial aid.

As this link notes: "Believe it or not, you can have a million dollars socked away in your retirement accounts and it won’t affect your child’s eligibility for college aid."

http://www.forbes.com/sites/troyonink/2013/01/09/save-for-retirement-now-get-more-college-aid-later/

[Anonymous]

Thanks for the Forbes link. That was very interesting.

This section seems to answer a lt of the questions in this topic:

A standard income protection (meaning living) allowance, as well as federal, state and payroll taxes are subtracted from the parents’ adjusted gross income (AGI). After all of those allowances are subtracted, you’re left with net reportable income and the colleges expect you to use up to 47% of that amount for college. But here’s something that might surprise you, if a parent is currently making contributions (elective deferrals) to a 401k or similar plan, the contributions gets added back to the parents’ AGI before the calculation of net reportable income.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This looks like a loop hole. Completely ridiculous that if someone inherits a million dollars vs a million dollar house they would get aid. The system is broken.

Again, this attitude demonstrates both a lack of knowledge about how FA works and a fair bit of hypocrisy. Do you own a house? Are you selling it to pay for college?

Also, the OP did not inherit a $1m home. She inherited a home worth much less than that. If it were in southern CA, it might be worth less now than it was when she inherited it. Assuming you own a home in the DC area, the same housing market that has pushed the value of her home so high gas also benefitted you.

possibly. but if the home is worth 1M now it means that it is larger, closer in/shorter commute with better schools than most homes where the rest of us live. OP and her family have had it better than vast majority of others, including many who earn more (and arguably, deserve it more). it seems unfair that she should get so much aid.

So what you are saying is you are resentful because someone with a lower income hasn't suffered enough?

financial aid is a limited resource and should be distributed based on need. it is ridiculous to argue that those who have all their (substantial) wealth tied in real estate are somehow more needy than others who have less wealth.

True. But you also can't expect someone to sell their home and move. Real estate isn't exactly liquid and you can't sell 1/10 of a home to pay for college. Also home prices rise and this isn't necessarily part of your control.

[Anonymous]

The op is an idiot for having 4 kids when she has earned much her whole life, and yet expects all of them to go to college. I repeat: you. are. an. idiot.

Zero sympathy for you. The fact that you haven't even considered a cheap in-state school as a compromise and keeping yapping about Amherst and Williams just reinforces to me what a colossal idiot you are.

[Anonymous]

Sorry hasn't* earned much her whole life.

[Anonymous]

Ah, I was wondering when someone would pipe up and bash OP for having four children. Took you long enough!

[Anonymous]

Anonymous wrote:Ah, I was wondering when someone would pipe up and bash OP for having four children. Took you long enough!

Don't try and put me on the defensive. If you think a grown adult isn't responsible for family planning then I'm happy to "bash" you for being an idiot as well.