Question: My parents left me a trust. I am entitled to the interest income and $5,000 annually. The remainder of the principal stays in the trust until I die. The trust then terminates and the remaining principal is distributed to my son. My son is going to college next year. Will my trust impact my son’s eligibility for financial aid when he applies to college? Answer: Trust funds are generally included as an asset on the FAFSA (application for federal student aid) even though a trust beneficiary’s access to the trust is restricted by the terms of the trust and the ability of the Trustee to make distributions. This is true in cases where the parent or dependent child is a beneficiary of the trust. So whereas trusts are many times viewed as a way to protect one’s assets from creditor claims or even from nursing home costs in certain instances, a trust which provides for restrictions to the income and principal does not generally affect the requirement to report the value of the trust on the FAFSA. There are some exceptions to the rule and trusts established for a specific purpose are excluded from having to be reported on a financial aid application. One example of a trust that could be excluded from the financial aid application is a trust where access to the trust was excluded for a specific purpose (e.g., a trust fund established to pay medical expenses for a victim of an accident).
ABOUT STEVE SHANE
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates. You can connect with Offit Kurman via our Blog, Facebook, Twitter, Google+, YouTube, and LinkedIn pages. You can also sign up to received Law Matters, Offit Kurman’s monthly newsletter covering a diverse selection of legal and corporate thought leadership content.
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