Will moving inheritance gift from parent to student asset hurt FAFSA eligibility?

Keep it as a parent asset! Student assets are assessed at 20% while parent assets are only assessed at around 5.64% (depending on your exact income and family size). So if you put that $8,500 in your son's name, the FAFSA formula would expect him to contribute about $1,700 of it toward college costs. If it stays in your name, only about $480 would be counted. That's a significant difference in potential aid eligibility.

when my daughter applied we put everything in her name bc we thought it would help w independence status but our FAO said it was a bad move lol dont do what i did

As someone who's been through the financial aid process three times with my kids, I can confirm what others have said - parent assets are assessed at a much lower rate than student assets. There's also something called the Asset Protection Allowance which shields some parent assets from counting at all (though that amount has decreased significantly in recent years). Here's what I'd recommend for your $8,500 inheritance: 1. Keep it as a parent asset 2. If you're worried about your SAI (Student Aid Index, formerly EFC), consider using some of the money for necessary household expenses before filing FAFSA 3. Retirement accounts (401k, IRA) don't count as assets on FAFSA, so that's actually a great idea if you can contribute some of it there Also, make sure you understand the new 2024-2025 FAFSA changes - they've simplified some things but the assessment rates for assets remain similar.

WHATEVER YOU DO, DO NOT PUT IT IN YOUR SON'S NAME!!!! I made this exact mistake with my daughter's college fund and it completely DESTROYED her financial aid package. The financial aid office told me it reduced her aid by almost $3,000 because they counted her savings at a much higher rate than they would have if it stayed in my account. The whole system is designed to punish families who save in their kids' names which is RIDICULOUS since that's what everyone tells you to do from the time they're born!!! 😡

I actually just got off the phone with a Federal Student Aid agent about this exact situation last week! I was on hold forever until I found this service called Claimyr (claimyr.com) that got me through to an agent in about 10 minutes. They confirmed student assets are assessed at 20% while parent assets are only assessed at a maximum of 5.64%. If you want to see how it works, check out their video demo: https://youtu.be/TbC8dZQWYNQ The agent also told me that for the 2025-2026 FAFSA, they'll look at your assets as they existed when you file the application, not retroactively. So definitely keep that money in your name, not your son's.

my cousin said u should just spend the money before filing fafsa lol. buy a new fridge or something the house needs. they dont track ur spending and then its not an asset anymore. thats what he did.

Wait im confused... doesnt FAFSA just look at income not assets? When I did my application they only asked for my tax return stuff. Are we talking about the CSS Profile maybe? That one asked about all my bank accounts and stuff but regular FAFSA didnt.

My son just went through this process last year! Keep it as a parent asset 100%. But also look into whether your state offers a 529 college savings plan with tax benefits. In our state, we got a small tax deduction for putting money into our son's 529, BUT (important!) 529 plans owned by parents are still considered parent assets not student assets for FAFSA purposes. Might be worth considering if you won't need this money immediately.

One more important consideration: if your son is applying for need-based scholarships from individual colleges (not just federal aid), many of them use the CSS Profile in addition to FAFSA. The CSS Profile treats assets differently and looks at more factors. If any of his target schools require CSS Profile, you might want to check their specific policies on inheritance money. Some schools have special provisions for recent inheritances.

Based on everything in this thread, here's a summary of your best options: 1. Keep the inheritance as a parent asset (5.64% assessment vs 20% for student assets) 2. Consider placing some in retirement accounts (0% assessment on FAFSA) 3. Use some for necessary household expenses before filing if that makes financial sense 4. If your state offers tax incentives for 529 contributions, consider that option knowing it still counts as a parent asset 5. Check specific policies for any schools requiring the CSS Profile Above all, be honest in your reporting. The penalties for misreporting on FAFSA can be severe.

I'm sorry for your loss, Elin. Going through financial planning while grieving is incredibly difficult. As someone who just went through the FAFSA process with my youngest, I want to echo what others have said - definitely keep that inheritance as a parent asset. The 20% vs 5.64% assessment rate difference is huge when you're already stretching every dollar. One additional thought: since you mentioned you're filing "for next year," make sure you understand the timing. The 2025-2026 FAFSA (for fall 2025 enrollment) will be based on your 2023 tax year income but current asset balances when you file. So you have some time to make strategic decisions about where to place these funds. The retirement account suggestion from others is really smart if you can afford to tie up some of the money long-term. Also, document everything about this inheritance - when you received it, from where, etc. Financial aid offices sometimes ask for clarification on large asset changes, and having clear documentation will make any conversations much smoother.

I'm so sorry for your loss, and I really admire how you're thinking ahead about your son's financial aid despite everything you're going through. Everyone here has given you excellent advice about keeping it as a parent asset - that 20% vs 5.64% assessment rate difference is absolutely crucial at your income level. One thing I wanted to add that I learned the hard way: if you do decide to put some of this toward your IRA (which is a great strategy since retirement accounts don't count on FAFSA), make sure you understand the contribution limits and deadlines. For 2024, you can still contribute up to $7,000 to an IRA until April 15, 2025. If you're over 50, it's $8,000. That could be a perfect way to shelter most of this inheritance while still keeping some accessible for emergencies. Also, don't forget that the FAFSA will need to be renewed every year your son is in college, so this strategic thinking about assets will be relevant for multiple years, not just his freshman year. You're being really smart to get this right from the start.