Inheritance and College Financial Aid

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My mother passed away two years ago and left me a Designated Beneficiary Account worth about $500K. This is not a marital asset but is intended to partially fund DH’s and my retirement. Our HHI is $225K and our retirement savings are behind schedule due to graduate school loans, periods of unemployment, medical expenses, etc. We’re both 56.

We’ve saved enough in a brokerage account for an instate public college education for senior DD - $130K. I was reluctant to open a 529 years ago because we’re hoping DD will get a talent scholarship (this may happen) and she’s an only child. Of course, we’re not counting on a scholarship but wanted flexibility to use the funds for retirement or help her with a house downpayment someday if we can.

Now that we’re about to fill out financial aid forms, and considering a few OOS options, I’m wondering if we should do something smarter with this designated beneficiary account and brokerage account that will afford flexibility and minimize the negative impact this will have on college financial aid.

Should we open a 529 now? Would that make a difference in financial aid calculations? Or should we wait to find out where DD lands since we’ve waited this long to preserve flexibility?

This is precisely why we have so much wealth disparity in this country. This couples daughter I don't care how smart she is, she shouldn't get a "talent" scholarship because her parents clearly have enough saved.

WTH?!?!?! So my kid should not get a merit award (total Merit, based on their skills and what they bring as an applicant) because we have money? Not how it works

We had enough saved for college (and then some on our own) we didn't fill out fafsa or any CSS. Both kids got good merit. One got $42K/year at a school that cost $85 their freshman year (merit continues for all 4 years). The other got $18K at a school that cost $55-60K.

Just because you choose not to save doesn't mean other kids have to be penalized for merit awards.

Stick to your financial aid package and consider all your in-state schools and CC if needed to afford school. Nobody is entitled to an "elite education" for free.

You are greedy.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My mother passed away two years ago and left me a Designated Beneficiary Account worth about $500K. This is not a marital asset but is intended to partially fund DH’s and my retirement. Our HHI is $225K and our retirement savings are behind schedule due to graduate school loans, periods of unemployment, medical expenses, etc. We’re both 56.

We’ve saved enough in a brokerage account for an instate public college education for senior DD - $130K. I was reluctant to open a 529 years ago because we’re hoping DD will get a talent scholarship (this may happen) and she’s an only child. Of course, we’re not counting on a scholarship but wanted flexibility to use the funds for retirement or help her with a house downpayment someday if we can.

Now that we’re about to fill out financial aid forms, and considering a few OOS options, I’m wondering if we should do something smarter with this designated beneficiary account and brokerage account that will afford flexibility and minimize the negative impact this will have on college financial aid.

Should we open a 529 now? Would that make a difference in financial aid calculations? Or should we wait to find out where DD lands since we’ve waited this long to preserve flexibility?

This is precisely why we have so much wealth disparity in this country. This couples daughter I don't care how smart she is, she shouldn't get a "talent" scholarship because her parents clearly have enough saved.

Look at it this way: kid is an excellent flutist. School 1 needs an incoming freshman excellent flutist. Kid is accepted to School 1 (her dream school) and School 2 (which is affordable). If School 1 offers money to entice a student needed to round out and diversify their student body, of course offering talent, merit, sports money makes sense.

+1. This is OP. DD has a desireable talent (not a made up one as implied by the quotation marks up thread). She intends to pursue her passion in college and beyond while adding a second degree. She’s only applying to schools that value her art and offer generous scholarships. She’s been encouraged to apply by the schools themselves, but that is of course no guarantee.

And for those who say it was “dumb” not to start a 529, maybe. But we were only in a position to do so in the past 10 years while maxing our retirement for the first time. We can second guess our choices to pursue graduate degrees to work in nonprofits another time. This newfound wealth is a recent development and we’re still learning how it changes our financial outlook. Plus, my brother is sitting on $300k in his kids’ 529 because one kid got an athletic scholarship and the other chose a trade instead of college. Neither want kids. We have an only.

Clearly this decision is bigger than college financial aid, which is why I posted in this forum instead of the College one. But I appreciate the subject line and my OP missed the forest for the trees. It seems we need a financial advisor stat and to focus on retirement. And we need to come to terms with the fact that we have money now, when we didn’t before, and it’s time to learn how to manage it moving forward.

I appreciate those who offered advice instead of judgement.

Your brother could have withdrawn without penalty the amount that his child received in scholarships. (Maybe he did that).

No penalty be he will
Owe taxes on the growth.

This is not true. Can withdraw amount of scholarship without paying any taxes on growth.

[Anonymous]

You’re not going to get any need based financial aid anywhere, so don’t worry about it.

[Anonymous]

OP, there might be some useful information here:

https://tamingthehighcostofcollege.com/8-inherited-assets-and-how-they-impact-college-financial-aid/

But I still don't think you will qualify for any need based financial aid anyhow.

[Anonymous]

ALL savings will be considered for financial aid. The OP has not clarified how this money came to her except she was a beneficiary. Did you receive it in cash, life insurance or IRA?

[Anonymous]

Anonymous wrote:ALL savings will be considered for financial aid. The OP has not clarified how this money came to her except she was a beneficiary. Did you receive it in cash, life insurance or IRA?

Sorry it was a brokerage account invested in stocks.

[Anonymous]

Anonymous wrote:

Anonymous wrote:My mother passed away two years ago and left me a Designated Beneficiary Account worth about $500K. This is not a marital asset but is intended to partially fund DH’s and my retirement. Our HHI is $225K and our retirement savings are behind schedule due to graduate school loans, periods of unemployment, medical expenses, etc. We’re both 56.

We’ve saved enough in a brokerage account for an instate public college education for senior DD - $130K. I was reluctant to open a 529 years ago because we’re hoping DD will get a talent scholarship (this may happen) and she’s an only child. Of course, we’re not counting on a scholarship but wanted flexibility to use the funds for retirement or help her with a house downpayment someday if we can.

Now that we’re about to fill out financial aid forms, and considering a few OOS options, I’m wondering if we should do something smarter with this designated beneficiary account and brokerage account that will afford flexibility and minimize the negative impact this will have on college financial aid.

Should we open a 529 now? Would that make a difference in financial aid calculations? Or should we wait to find out where DD lands since we’ve waited this long to preserve flexibility?

This is precisely why we have so much wealth disparity in this country. This couples daughter I don't care how smart she is, she shouldn't get a "talent" scholarship because her parents clearly have enough saved.

So you are opposed to merit scholarships as a matter of principle? OK.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My mother passed away two years ago and left me a Designated Beneficiary Account worth about $500K. This is not a marital asset but is intended to partially fund DH’s and my retirement. Our HHI is $225K and our retirement savings are behind schedule due to graduate school loans, periods of unemployment, medical expenses, etc. We’re both 56.

We’ve saved enough in a brokerage account for an instate public college education for senior DD - $130K. I was reluctant to open a 529 years ago because we’re hoping DD will get a talent scholarship (this may happen) and she’s an only child. Of course, we’re not counting on a scholarship but wanted flexibility to use the funds for retirement or help her with a house downpayment someday if we can.

Now that we’re about to fill out financial aid forms, and considering a few OOS options, I’m wondering if we should do something smarter with this designated beneficiary account and brokerage account that will afford flexibility and minimize the negative impact this will have on college financial aid.

Should we open a 529 now? Would that make a difference in financial aid calculations? Or should we wait to find out where DD lands since we’ve waited this long to preserve flexibility?

This is precisely why we have so much wealth disparity in this country. This couples daughter I don't care how smart she is, she shouldn't get a "talent" scholarship because her parents clearly have enough saved.

WTH?!?!?! So my kid should not get a merit award (total Merit, based on their skills and what they bring as an applicant) because we have money? Not how it works

We had enough saved for college (and then some on our own) we didn't fill out fafsa or any CSS. Both kids got good merit. One got $42K/year at a school that cost $85 their freshman year (merit continues for all 4 years). The other got $18K at a school that cost $55-60K.

Just because you choose not to save doesn't mean other kids have to be penalized for merit awards.

Stick to your financial aid package and consider all your in-state schools and CC if needed to afford school. Nobody is entitled to an "elite education" for free.

You are greedy.

Like it or not, many colleges reward assets over need. That’s not greed, it’s reality. The trick is to match the colleges with the commodity. Some schools offer merit and some meet 100% need. Pick the one that fits your situation. It’s odd to blame someone for targeting the right schools for them and taking the best offer.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My mother passed away two years ago and left me a Designated Beneficiary Account worth about $500K. This is not a marital asset but is intended to partially fund DH’s and my retirement. Our HHI is $225K and our retirement savings are behind schedule due to graduate school loans, periods of unemployment, medical expenses, etc. We’re both 56.

We’ve saved enough in a brokerage account for an instate public college education for senior DD - $130K. I was reluctant to open a 529 years ago because we’re hoping DD will get a talent scholarship (this may happen) and she’s an only child. Of course, we’re not counting on a scholarship but wanted flexibility to use the funds for retirement or help her with a house downpayment someday if we can.

Now that we’re about to fill out financial aid forms, and considering a few OOS options, I’m wondering if we should do something smarter with this designated beneficiary account and brokerage account that will afford flexibility and minimize the negative impact this will have on college financial aid.

Should we open a 529 now? Would that make a difference in financial aid calculations? Or should we wait to find out where DD lands since we’ve waited this long to preserve flexibility?

This is precisely why we have so much wealth disparity in this country. This couples daughter I don't care how smart she is, she shouldn't get a "talent" scholarship because her parents clearly have enough saved.

Look at it this way: kid is an excellent flutist. School 1 needs an incoming freshman excellent flutist. Kid is accepted to School 1 (her dream school) and School 2 (which is affordable). If School 1 offers money to entice a student needed to round out and diversify their student body, of course offering talent, merit, sports money makes sense.

+1. This is OP. DD has a desireable talent (not a made up one as implied by the quotation marks up thread). She intends to pursue her passion in college and beyond while adding a second degree. She’s only applying to schools that value her art and offer generous scholarships. She’s been encouraged to apply by the schools themselves, but that is of course no guarantee.

And for those who say it was “dumb” not to start a 529, maybe. But we were only in a position to do so in the past 10 years while maxing our retirement for the first time. We can second guess our choices to pursue graduate degrees to work in nonprofits another time. This newfound wealth is a recent development and we’re still learning how it changes our financial outlook. Plus, my brother is sitting on $300k in his kids’ 529 because one kid got an athletic scholarship and the other chose a trade instead of college. Neither want kids. We have an only.

Clearly this decision is bigger than college financial aid, which is why I posted in this forum instead of the College one. But I appreciate the subject line and my OP missed the forest for the trees. It seems we need a financial advisor stat and to focus on retirement. And we need to come to terms with the fact that we have money now, when we didn’t before, and it’s time to learn how to manage it moving forward.

I appreciate those who offered advice instead of judgement.

He can withdraw an amount equal to the scholarship. You could too, if you had a 529. Also, he can convert $35k each into Roth IRAs for his kids.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My mother passed away two years ago and left me a Designated Beneficiary Account worth about $500K. This is not a marital asset but is intended to partially fund DH’s and my retirement. Our HHI is $225K and our retirement savings are behind schedule due to graduate school loans, periods of unemployment, medical expenses, etc. We’re both 56.

We’ve saved enough in a brokerage account for an instate public college education for senior DD - $130K. I was reluctant to open a 529 years ago because we’re hoping DD will get a talent scholarship (this may happen) and she’s an only child. Of course, we’re not counting on a scholarship but wanted flexibility to use the funds for retirement or help her with a house downpayment someday if we can.

Now that we’re about to fill out financial aid forms, and considering a few OOS options, I’m wondering if we should do something smarter with this designated beneficiary account and brokerage account that will afford flexibility and minimize the negative impact this will have on college financial aid.

Should we open a 529 now? Would that make a difference in financial aid calculations? Or should we wait to find out where DD lands since we’ve waited this long to preserve flexibility?

This is precisely why we have so much wealth disparity in this country. This couples daughter I don't care how smart she is, she shouldn't get a "talent" scholarship because her parents clearly have enough saved.

WTH?!?!?! So my kid should not get a merit award (total Merit, based on their skills and what they bring as an applicant) because we have money? Not how it works

We had enough saved for college (and then some on our own) we didn't fill out fafsa or any CSS. Both kids got good merit. One got $42K/year at a school that cost $85 their freshman year (merit continues for all 4 years). The other got $18K at a school that cost $55-60K.

Just because you choose not to save doesn't mean other kids have to be penalized for merit awards.

Stick to your financial aid package and consider all your in-state schools and CC if needed to afford school. Nobody is entitled to an "elite education" for free.

You are greedy.

Like it or not, many colleges reward assets over need. That’s not greed, it’s reality. The trick is to match the colleges with the commodity. Some schools offer merit and some meet 100% need. Pick the one that fits your situation. It’s odd to blame someone for targeting the right schools for them and taking the best offer.

I don’t understand why it’s greedy to accept huge scholarships that cover most of college costs if the kid worked hard to get it. Some colleges want to
Pony up and offer these to entice bright kids. Those who don’t, they can go after full pay kids. What’s wrong with that?

[Anonymous]

Anonymous wrote:OP, merit scholarships don't have anything to do with your income or assets, of course.

Savings are savings, for financial aid. Whether a 529, or a savings account, or a brokerage account... all your assets (except for retirement i.e. tax deferred 401k, 403b) will be considered as part of your financial strength in paying for college. Parents are expected to be able to contribute 5% of their savings per year towards college. Which, if you are getting about 5% interest on the account, seems fair?

If the inheritance is in the form of a retirement account it might not be looked at; I don't know. But yes, either put it into your own retirement accounts every year, or use it to pay down your mortgage I suppose. Some colleges do consider home equity in determining financial aid.

Generally speaking, private colleges with good endowments and the ability to offer financial aid to many, will look at your income and expect you will be able to contribute a good portion of it to college. I think it's about 25% of your income... because they are expecting that you should have been able to save some, cash flow lots, and even borrow if need be. So looking at that $225K annual income? That is where you are not going to be offered any financial aid at most school. They are going to expect you to be abole to cough up $56K annually for college + another $10k from savings + whatever else from equity in your house... you are not going to qualify for need based financial aid at most schools.

So either save up $80K per year to cover the cost of an expensive private school, or tell your kids to set her sights on a reasonable $34K school and start saving to cover it.

+1. OP, you should assume that every college is going to expect you can contribute **at least** $66k per year. It sounds like you have already set aside about half that for college. Can you finance $3000/month out of cash flow? Are you willing to have DD take out a federal loan? If yes, then you can probably squeak by at many schools without any aid and without dipping further into savings.

The question is whether this is a smart thing to do for a couple in their 50s who is behind on saving for retirement. You really must see a fee-only (very important!) financial advisor.

If I were you, I would be looking at in-state schools and private colleges that offer significant *merit* aid (not financial aid, which is based on need) to students like your DD. This could be for your DD's particular talent and/or for her grades and test scores, depending on what they are. (Note that many elite colleges offer only need-based financial aid, not merit aid, no matter what her talent.) Given her talent and your financial situation, she may need to submit a lot of applications, but also absolutely ensure that she has a few in-state safeties. And then see what happens.

You need to have a very frank conversation with your DD about what you can afford to pay so that she knows the decision about where she goes will be made based on finances, not on what her dream school is.

A tip: Harvard is perhaps the most generous university in the US when it comes to need-based financial aid. They also have a good financial aid estimator on their website. Plug in your details there and see what it says. That's a pretty good estimate of the *most* financial aid your DD could qualify for. Any other assistance would have to come from merit-based scholarships.

[Anonymous]

Anonymous wrote:My mother passed away two years ago and left me a Designated Beneficiary Account worth about $500K. This is not a marital asset but is intended to partially fund DH’s and my retirement. Our HHI is $225K and our retirement savings are behind schedule due to graduate school loans, periods of unemployment, medical expenses, etc. We’re both 56.

We’ve saved enough in a brokerage account for an instate public college education for senior DD - $130K. ..

Later you posted the 500k is not in a retirement account. One senior in HS apparently and you can open a 529. Each state has different aggregate amounts and provisions for reducing your state income taxes. VA 4k MD 5k. That doen't mean you can only contribute 4k. 2024 is almost over so maybe gift the max for MFJ 36k. One kid? Check into superfunding the 529 - seems designed for the purpose of inheritance or a GP big cash and get it over woth. https://www.savingforcollege.com/article/10-rules-for-superfunding-a-529-plan

Financial aid is not in your future considering your assets and income.

[Anonymous]

Anonymous wrote:ALL savings will be considered for financial aid. The OP has not clarified how this money came to her except she was a beneficiary. Did you receive it in cash, life insurance or IRA?

Not exactly. If the college is using FAFSA only, tax deferred retirement accounts are not reported or used in calculation.

If the college is a CSS Profile school, they will ask about retirement accounts, but assuming you have "typical resources" the amount in retirement accounts is not included in making calculations of need based aid.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My mother passed away two years ago and left me a Designated Beneficiary Account worth about $500K. This is not a marital asset but is intended to partially fund DH’s and my retirement. Our HHI is $225K and our retirement savings are behind schedule due to graduate school loans, periods of unemployment, medical expenses, etc. We’re both 56.

We’ve saved enough in a brokerage account for an instate public college education for senior DD - $130K. I was reluctant to open a 529 years ago because we’re hoping DD will get a talent scholarship (this may happen) and she’s an only child. Of course, we’re not counting on a scholarship but wanted flexibility to use the funds for retirement or help her with a house downpayment someday if we can.

Now that we’re about to fill out financial aid forms, and considering a few OOS options, I’m wondering if we should do something smarter with this designated beneficiary account and brokerage account that will afford flexibility and minimize the negative impact this will have on college financial aid.

Should we open a 529 now? Would that make a difference in financial aid calculations? Or should we wait to find out where DD lands since we’ve waited this long to preserve flexibility?

This is precisely why we have so much wealth disparity in this country. This couples daughter I don't care how smart she is, she shouldn't get a "talent" scholarship because her parents clearly have enough saved.

WTH?!?!?! So my kid should not get a merit award (total Merit, based on their skills and what they bring as an applicant) because we have money? Not how it works

We had enough saved for college (and then some on our own) we didn't fill out fafsa or any CSS. Both kids got good merit. One got $42K/year at a school that cost $85 their freshman year (merit continues for all 4 years). The other got $18K at a school that cost $55-60K.

Just because you choose not to save doesn't mean other kids have to be penalized for merit awards.

Stick to your financial aid package and consider all your in-state schools and CC if needed to afford school. Nobody is entitled to an "elite education" for free.

You are greedy.

Like it or not, many colleges reward assets over need. That’s not greed, it’s reality. The trick is to match the colleges with the commodity. Some schools offer merit and some meet 100% need. Pick the one that fits your situation. It’s odd to blame someone for targeting the right schools for them and taking the best offer.

I don’t understand why it’s greedy to accept huge scholarships that cover most of college costs if the kid worked hard to get it. Some colleges want to
Pony up and offer these to entice bright kids. Those who don’t, they can go after full pay kids. What’s wrong with that?

it's not. The PP I suspect is a troll. Or simply didn't save for college and/or kids don't qualify for merit.

Hint: there is merit out there for most kids. My 1250/3.5UW/No AP kid got 35% of tuition yearly at two T80 schools, and 65% of tuition at a T130. Had we needed more, they would have applied to more schools in the 100-200 range and found it (Most likely).
My 3.98UW/1500/8AP (all stem) kid got merit at almost all schools in the 30-80 range, it was only those in the T30 they didn't/didn't get into either. One T50 offered them $42K/year merit, so ~50-55% of Total Costs. My kid did not take it (it was their 2nd choice in April of schools they got admitted to). Most kids would have, even if parents could fully pay. Had we needed merit (once again) they would have taken it or would have applied to more in the 75-120 and gotten almost full scholarships.
Both kids worked hard to be their best academically (for them). If colleges want to reward that, good for them. Outside of T30-50 schools, great merit exists. Smart people chase merit, if they cannot easily afford to be full pay.

Kids should not be penalized because they are smart and their parents have saved for college. That's the entire point of merit. It's not financially based.

There is an affordable college path for most kids.

1) Dual entry in HS for virtually free, then 2-3 years at a 4 year state school. Kid goes somewhere that gives them some merit (Trust me: VCU or GMU will give your good student some merit, great students will get a bit more). Kid will take $5K in Loans each year, kid will earn $10-12K/year to help pay and with only 2-3 years to pay for they can come out with only $10-15K in loans, parents might need to help with $5-7K/year at most.

2) Same as above but do CC while living at home for 2 years. This can be funded by the student working summers (more than enough and save $$ for the years at 4 year). Then transfer to 4 year in-state. Similar results---$10-15K in loans, kid contributes $10-12K/year and parents contribute maybe $5K/year for 2 years ($10K)

3) Student does well in HS, applies to get merit at "lower tiered Privates" or goes to 2nd tiered State schools that give them merit. If possible live at home, if not it's still manageable for many. Once again kid needs to earn $10-15K/year (not hard with DCUM min wages---I used to earn $5K /year when min wages were $4)

4) Kid finds a 4 year that gives them enough merit to afford the school. go 2 tiers below your "reach" schools and you can likely find this.

Merit is out there. It's up to you if you want to use it.

As for the PP: nothing in life is guaranteed. If you want it, work hard for it. That is how life works.

[Anonymous]

Anonymous wrote:

Anonymous wrote:ALL savings will be considered for financial aid. The OP has not clarified how this money came to her except she was a beneficiary. Did you receive it in cash, life insurance or IRA?

Sorry it was a brokerage account invested in stocks.

Then all of it will count for purposes of financial aid. And efforts to shield it now will have limited utility, if any, because of the reporting requirements for financial aid. It should not affect merit or talent scholarships, though.