End of the year Asset Questions


One of the FAFSA questions I have received over the years from friends, relatives and parents at our ICAN presentations has been about assets that they have, and if they have to do something with them by the end of the year so it doesn’t hurt them on their FAFSA.    Since we are at the end of 2018,  I thought this might be a good topic to hit before we get into 2019.  

First thing, I would say when answering this question, would that the FAFSA asks about your assets “As of today” which means the day you are filling out the FAFSA.    For FAFSA purposes,  you  don’t have to do anything by this Dec. 31st to have it not be counted on the FAFSA for 2020-21 (which will ask for 2018 Tax info).   

For example,  if a student had money in their savings to buy a car,  they wouldn’t need buy the car by this Dec. 31st for the money not to be included on their FAFSA.  They would just need to buy the car before the day they were filling out their 2020-21 FAFSA  next October, November, December, or whenever they were going to fill it out.  

Secondly,   when I get ask this question by parents or just a question in general about moving their assets so it doesn’t hurt them on the FAFSA,  I will ask them what their Adjusted Gross Income (AGI) is on their taxes.   Why do I ask this?   It isn’t just to be nosy about what they make.    The reason I ask this is because many times parents that have many assets also have a higher AGI  and that is going to make the families already have a higher Expected Family Contribution (EFC),  which the amount of money they are expected to be able to contribute towards a student’s education.  Getting this EFC number is the reason families need to fill out the FAFSA so colleges determine what a student’s financial need is and how much financial aid they can receive.  

In many cases, even though the family would have a higher EFC number if they had to count those assets on the FAFSA, it will already be a high enough EFC just based on their AGI that they won’t have financial need at schools the student is looking at anyway.   In these cases,  it isn’t going to help the student get any more financial aid by moving the assets.    So families should only move them if they were going to do it anyway, like putting money from their savings into retirement or paying down on their primary residence. 

The last thing families should consider if they going to move assets from one place to another, would be what tax ramifications that will have for them.   This is an area where I like to joke around that we are “just dangerous enough” to know a few things about some situations and the tax ramifications for them.  But we are NOT tax experts.    Families should check with a tax preparer to find out those ramifications before moving those assets.  

I realize as I am writing this,  this question can be very confusing to families.   So if you do have any questions about this please give us a call at ICAN:  877-272-4692.      We will answer those questions you have or guide you in the right direction to get them answered.  

Happy New Year!   

Erick - ICAN Ankeny and Des Moines Centers