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Slewnior
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Posted: Fri Jan 11th, 2008 12:24 pm |
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Are assets held by a court approved guardian (the parents) considered assets of the child/student, a minor as of the CSS and FAFSA filing dates?
Where EFC is calculated at $0 when the assets are deemed those of the child/student, and EFC is almost $30k when deemed not, I'd obviously prefer the latter. 
Thanks.
Last edited on Fri Jan 11th, 2008 12:27 pm by Slewnior
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Chedva
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Posted: Fri Jan 11th, 2008 04:54 pm |
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If they are held in trust with the child as the beneficiary, and it is an irrevocable trust (i.e., the beneficiary cannot be changed), I believe that they are considered to be assets of the child, just as a UTMA account is an asset of the child.
I'm just a bit confused - usually the child's assets are assessed as available at a higher rate than the parents' assets. How does it work out that if the assets are the child's your EFC is lower than if the assets were yours?
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mominva
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Posted: Fri Jan 11th, 2008 05:02 pm |
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I wonder if the conditions of the trust are such that the funds are not avaiable until the child reaches a certain age (say 25)?
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Chedva
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Posted: Fri Jan 11th, 2008 05:05 pm |
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| That usually doesn't matter, I thought, since the assets could either be borrowed against or used to repay any college loans when the funds became available.
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CarolynLawrence
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Posted: Fri Jan 11th, 2008 09:23 pm |
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Chevda is correct: any assets held in the child's name or in a trust for the child are counted at a higher percentage than those held in the parent's name (i.e., a bank account in the parent's name). So, in general, it is better not to put "college savings" in the name of a child, but keep them in the parents name for financial aid purposes.
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Slewnior
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Posted: Sat Jan 12th, 2008 12:04 pm |
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Thanks for the responses. Let me clarify, a bit.
The assets in question are not in a "trust." They are held in the name of the parents, "as guardians for [child/student]" pursuant to a probate court order. The reason is not all that relevant, but it stems from the fact that most of the assets are real estate and in the state of residence (and location of the real estate), that is the only lawful method of ownership for minors.
The assets, perhaps like most trusts and UGMA accounts, may be used discretionarily by the guardians to pay for "health, education and welfare" of the child, and the guardianship will be discharge at age 18.
I'm aware of the rules concerning trusts and UGMA accounts. I was just wondering/hoping that the rule was different when the ownership is nominally different in a guardianship situation.
I don't think it is...just fishing for any hope because of the huge difference in the EFC.
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CarolynLawrence
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Posted: Sat Jan 12th, 2008 02:41 pm |
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| I would suggest that you call the financial aid office at either one of the schools where your daughter has applied, or a local college and ask them for clarification on this issue. Most should be very happy to help. I would be hesitant to give you advice on a complex issue like this, so the best thing is to go directly to a financial aid officer who knows exactly how FAFSA and Profile information is used and applied according to both Federal AND Institutional methodology.
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lfm
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Posted: Sat Jan 12th, 2008 02:55 pm |
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| Does this property generate income? if so, who pays the taxes? by that, I mean, who's tax form does it appear - yours or your childs?
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Slewnior
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Posted: Sat Jan 12th, 2008 03:16 pm |
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| The child's....and what I've read suggests that may be the deciding factor.
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lfm
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Posted: Sat Jan 12th, 2008 05:08 pm |
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Slewnior wrote: The child's....and what I've read suggests that may be the deciding factor.
Indeed it does. OTOH, I am not sure how non liquid assests work. Surely, the income from the property will need to be counted. but the value of the property? I am not so sure about that. Call the schools. Call several, and get a consensus.
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Slewnior
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Posted: Sat Jan 12th, 2008 06:34 pm |
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That's what I'll do. Thanks for the thought.
The value of this property is a huge wild card, as well. It was purchased in 1998, reassessed by the town in '99 at roughly 80% over the purchase price, has not been objectively appraised since purchase, is owned as joint tenants w/rt. of survivorship with the child's sibling, and there has not been a comparable sale of raw land in the town of residence in many, many years that I'm aware of.
A conservative estimate might make the value fully half of the child's assets, and the lack of liquidity is really an interesting thought.
My wife and I pay the property taxes on the piece, and it generates no income.
Thanks, again. I'll post what the schools say.
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Chedva
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Posted: Sat Jan 12th, 2008 07:10 pm |
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| The fact that it's not a liquid asset may not matter since it's an asset that can be mortgaged. After all, that's what schools expect parents to do when they count "home equity" as an asset - that's not liquid either. The main question would be its value.
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Slewnior
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Posted: Sun Jan 13th, 2008 11:46 am |
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Understood....but, a guardianship mortgaging raw land to finance college is not as simple as parents mortgaging their residence for a home equity line of credit. Not only is there a limited to non-existent mortgage market for raw land, the ability to repay is limited by the availability of liquid funds to repay the mortgage...which is a rapidly declining group of asset due to the obligation to college.
Also, the mortgage and note instruments cannot be executed without prior probate court approval. Complicating things further is the fact that the college age child owns the property jointly with a 14 year old sibling...both would have to mortgage their interests, no bank would take one joint holder's mortgage interest alone.
Value is nearly as complicated, but more easily resolved...provided the school wants to find a way to do that, outside of a market value appraisal by the guardian/parent or applying some federal formula to the purchase price.
My guess is the colleges will ask for an estimated value of the child's interest and an explanation of some considerable detail.
Last edited on Sun Jan 13th, 2008 11:58 am by Slewnior
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Chedva
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Posted: Sun Jan 13th, 2008 01:34 pm |
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| The joint ownership and probate court approval does complicate things. I'm not sure that colleges will care, though. But, as usual, Carolyn is correct - in such a situation, you need to consult experts, and speak to the FA offices involved.
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leftcoast
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Posted: Sun Jan 13th, 2008 09:06 pm |
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Is it possible for the guardianship to sell the land, and maintain the proceeds for investments for the children? I am asking because it doesn't sound like raw land has much value, especially for youngsters who are not in a position to develop the land -- it would certainly be a better fiscal decision for the 14 year old to have $$ invested in income-producing or appreciated funds ... and if the guardianship does allow for expenditures to be made for "health, education and welfare" it would be easier to do so with liquid assets. If the guardianship is discharged at age 18, what happens if your older child turns 18 and wants his share? Could he force sale of the real property in any case?
It seems to me that if you had $100K in cash and stocks in a joint guardianship for the kids, it would be a simple matter of attributing a 50% share to the oldest child -- the colleges would look to a certain percentage of that in calculating financial aid, from 20-35% depending on methodology used -- so a big chunk would be paid out for college.... but that's what the money is there for in any case.
It is complicated by the fact that the land is non-liquid.... but I just don't understand the reason for leaving things that way. I realize that market conditions may make this a bad time to sell.... but what's the point of holding title to a piece of land that no one in the family is using? It's just a tax liability at this point... and possibly a bigger liability than that. So it doesn't sound like a very wise investment.... and as guardians, you do have a fiduciary duty to the children to be making sound investment decisions. (I've got a legal background -- I think if I were in your situation I would be seeking legal and professional advice in terms of investment management decisions.)
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jocelynDAD
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Posted: Sun Jan 13th, 2008 09:46 pm |
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Well since the guardianship for the older child ends when he/she turns 18, a key question that the college wpould consider is the current age and when will she/he turn 18.
If that event precedes entrance into college, the entire question would be moot, as at 18 the guardianship is no longer relevant.
If any case, direct contact with the college FA office is the clearest path to getting a real answer to your question IMO> 
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Slewnior
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Posted: Mon Jan 14th, 2008 12:21 am |
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Age 18 will end the guardianship, but only for the 18 year old. The interest of the 18 year old is still bound to the 14 year old whose interest remains within the guardianship.
And, where the issue with trusts is solved with the ability to borrow against or take an advancement of principal under standard terminology, this is an illiquid asset and one that could not be pledge as collateral given the interest of the younger joint holder.
Calling each college which will have to look at this issue, tomorrow. I'll post summaries of those conversations.
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CarolynLawrence
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Posted: Mon Jan 14th, 2008 02:03 am |
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| In terms of federal methodology, you'll probably only need to call one financial aid office because the FAFSA is standard across the board. For the CSS Profile, which allows schools to also apply institutional methodology, you'll probably want to call each school individually. I would ask to speak to the director of financial aid if at all possible. Do let us know what you find out.
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Slewnior
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Posted: Thu Jan 17th, 2008 06:30 pm |
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I spoke to the financial aid directors at Trinity College (CT), Connecticut College, Wheaton (MA) and Skidmore.
All are interested in looking at the asset (of course), all confirmed that my description of the property in the supplemental information section of the CSS was the proper procedure, all held their cards very close to their vests...only the Skidmore director commented that "liquidity of the asset is not considered relevant, but I don't remember seeing land owned jointly by an applicant in a guardianship"....and only the Trinity director asked how much the property was worth.
On a side note, I found it interesting to have conversations with each of these directors. The conversations ran from delightful and helpful to a hint of contentiousness and near rude. What's interesting about that is my feelings from each phone call meshed with my daughter's when she's either visited campus or asked questions of the admissions personnel at each school.
For what it's worth, listed from delightful to near rude....Connecticut College, Skidmore, Trinity and then Wheaton. As far as understanding what the FAO wants by looking only at their websites....from most helpful to woefully inadequate...Skidmore, Connecticut, Trinity and Wheaton.
Of special note, however, I got an answering machine during working hours at Trinity with an out of date message, and when I finally got through the receptionist/assistant connected me to the director and I got her voice mail. It took her over 24 hours to return my call.
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Consolation
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Posted: Sun Jan 20th, 2008 12:27 am |
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The only wild card in our financial aid picture is a property owned jointly by my husband and his siblings. He cannot sell his share unless all agree, nor can they obtain a mortgage on it. (They tried to do so in order to get funds to invest in improvements.)
Depending on where this land is, and what familial attachment to it there is, I can certainly see that there could be a strong desire to hold on to it. They aren't making any more waterfront property, at least, not until California experiences The Big One.  (At which point all of our California friends will either have left, or will be perfectly situated to take advantage of the newe coastline, I devoutly hope!)
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