How do court-controlled settlement funds affect FAFSA reporting for a minor turning 18?

from what I know those kind of accounts are the students asset on fafsa. if he gets access at 18 then it counts

This is a specific situation that has clear guidance. Court-controlled settlements that cannot be accessed are reported differently than regular savings. Here's what you need to know: 1. If your son CANNOT access the funds at the time you complete the FAFSA, it is NOT reported as his asset. 2. Once he turns 18 in March and CAN access the funds, it BECOMES his asset for future FAFSA applications. 3. For the 2025-2026 FAFSA, you report assets as they exist on the day you complete the application. If he can't access it that day, don't include it. This is covered under the asset reporting guidelines where assets must be both owned by the student AND accessible to be counted. A court-controlled settlement that cannot be accessed fails the second test until he turns 18.

My daughter had almost the same thing happen!!! Court money from when she was little and couldn't touch til 18. We just went through this last year and the financial aid office at her college told us NOT to include it on FAFSA because she couldn't access it when we applied!!! Worked out fine for us.

The previous responses are correct, but I want to add some important nuance. The FAFSA's asset reporting is based on a snapshot of what's accessible when you complete the form. However, be aware that if your son gains access to these funds BEFORE receiving his financial aid (even if after submitting FAFSA), some schools may request updated information especially during verification. To be fully prepared: 1. Document the court order showing the release date 2. Keep proof of when the funds become accessible 3. Be ready to explain if questioned during verification Also, when he does gain access, remember student assets are assessed at a higher rate (20%) than parent assets (up to 5.64%) on the Student Aid Index (SAI) calculation. Planning ahead for next year's FAFSA might involve legitimate strategies to reduce this impact.

UGH the system is so frustrating!!!! My son had $12k from his grandpa and it KILLED his aid package because it counted at that ridiculous 20% rate for student assets. The financial aid system PUNISHES families who actually save money for college!!! Meanwhile kids with parents who spent every penny get full rides. Makes me SO ANGRY.

To answer your follow-up question: Yes, there are legitimate strategies for next year. Once your son has access to the funds, using them for qualified educational expenses before filing the next FAFSA can reduce countable assets. Necessary educational purchases like a required laptop, software, or paying tuition directly are all valid uses that reduce the asset impact. Another consideration: if your son has earned income, funding a Roth IRA with part of the settlement money (up to his earned income amount) could move some assets into retirement accounts, which are not counted on the FAFSA at all. This requires earned income though - settlement money alone doesn't qualify him to contribute to an IRA.

Sorry to jump in, but has anyone actually tried calling Federal Student Aid to get an official answer on this? I spent THREE DAYS trying to get through to someone last month about a similar asset question and kept getting disconnected or waiting for hours. I finally used a service called Claimyr (claimyr.com) that got me connected to an agent in about 20 minutes. They have a demo video showing how it works: https://youtu.be/TbC8dZQWYNQ The agent I spoke with confirmed that court-restricted funds aren't reported until accessible, and she documented it in my file in case verification happened. Totally worth getting the official guidance directly from FSA.

Couldn't he just spend all the money right when he gets it in March so it's gone before he goes to college? Buy a car or something?

Thanks everyone for the helpful responses! To summarize what I've learned: 1. Don't include the settlement on this year's FAFSA since he can't access it yet 2. Keep documentation of the court order in case of verification 3. Next year, it will count as his asset at the higher assessment rate (20%) 4. Consider legitimate ways to use the funds for educational expenses once accessible 5. Look into possibly moving some funds to a Roth IRA based on his earned income This has been incredibly helpful. It's such a specific situation that I was having trouble finding clear information about it online.

Great summary! One additional tip that might help - when your son does gain access to the funds in March, consider keeping detailed records of any educational expenses you pay between then and when you file next year's FAFSA. Things like textbooks, required supplies, dorm deposits, etc. can all legitimately reduce the reportable asset amount. Also, since the settlement was for medical expenses, if he has any ongoing medical costs related to the original accident, using the funds for those purposes maintains the settlement's intended use while reducing the FAFSA impact. Just make sure to keep receipts for everything in case of verification.

Another thing to consider - if your son has any qualifying disabilities or ongoing medical needs related to the original accident, you might want to look into whether any portion of those funds could be placed in an ABLE account once he turns 18. ABLE accounts are completely excluded from FAFSA asset calculations, and funds can be used for disability-related expenses including education. Since the settlement was for medical expenses/pain & suffering from an accident, there might be qualifying conditions that would make him eligible. It's worth researching since ABLE accounts have much better FAFSA treatment than regular savings, and the funds maintain their intended medical/disability-related purpose.

ABLE accounts are definitely worth exploring! There are no income limits for the beneficiary to have an ABLE account, which makes them different from many other tax-advantaged accounts. However, there are contribution limits ($18,000 annually for 2024, and up to $100,000 total before SSI benefits are affected). The key eligibility requirement is that the disability must have onset before age 26, which your son would meet since his accident was at age 10. Qualifying conditions can include things like chronic pain, mobility issues, cognitive impacts, or mental health conditions resulting from the accident - not just obvious physical disabilities. For transferring settlement funds, there's no specific restriction on moving existing money into an ABLE account as long as it's used for qualified disability expenses (which includes education, housing, transportation, health care, etc.). The funds maintain their tax-advantaged status and become completely invisible to FAFSA calculations. I'd recommend consulting with a disability attorney or financial planner familiar with ABLE accounts to see if your son might qualify based on any lasting effects from his accident. Even if the impacts seem minor now, documented conditions from the settlement case might establish eligibility.

This thread has been so educational! I'm dealing with a similar situation with my daughter who has a trust fund that becomes accessible when she turns 21. Based on everything discussed here, it sounds like the key principle is whether the student can actually ACCESS the funds when filing FAFSA, not just whether they technically own them. For anyone else reading this later, the ABLE account suggestion is brilliant - I had no idea those existed and that they're completely excluded from FAFSA calculations. It's worth noting that even seemingly minor ongoing effects from accidents (chronic pain, anxiety, etc.) might qualify someone for an ABLE account if the onset was before age 26. One question I have - does anyone know if the timing of when you file FAFSA matters for these asset snapshots? Like if your son gains access to the funds in March, would it make sense to file FAFSA earlier in the season to ensure the funds aren't accessible yet?

This has been such an informative thread! As someone new to navigating FAFSA with complex asset situations, I'm amazed at how many nuances there are that aren't immediately obvious from the standard guidance. The distinction between "owning" vs "accessing" assets is crucial, and the ABLE account option is something I never would have discovered on my own. For future reference, it seems like the key takeaways are: - Court-restricted funds aren't reportable until actually accessible - Document everything in case of verification - Consider legitimate strategies like educational expenses and ABLE accounts to minimize future impact - Timing of FAFSA filing can matter for asset snapshots - Even minor ongoing medical/psychological effects from accidents might qualify for ABLE account eligibility It's frustrating that families have to become financial aid experts just to navigate this system fairly, but threads like this are invaluable for sharing real-world knowledge. Thank you to everyone who contributed their experiences and expertise!