Follow Brett Linkedin Facebook
Email Brett Email
Financial
Aug 10, 2018

College Corner: Is it a Bad Idea to Have Assets in my Child’s Name for College Planning?

Sponsored Content provided by Brett Tushingham - CFP®, CCFS®, Managing Member & CCO, Tushingham Wealth Strategies

We’re often asked how to optimize financial aid during our college planning discussions with clients. They have usually read somewhere or been told that it always makes sense to keep assets out of their child’s name.

This is not always true.     

College planning is unique for each family and so, too, should be your planning strategy. You first need to determine your Expected Family Contribution or “EFC”. Your EFC is used to analyze a students’ need for financial aid using a simple formula that subtracts the student’s expected family contribution (EFC) from a college’s total cost of attendance (Cost of Attendance – EFC = Financial Need). If a student’s EFC is less than a college’s cost of attendance, then the student qualifies for need-based financial aid.

The EFC calculation takes into account the income and assets of the parents and students but, generally speaking, assets in a child’s name will account for a higher EFC and therefore a potentially lower your “financial need”. Child-owned 529 and Coverdell accounts are exceptions for FAFSA purposes, as they are counted as “parent” assets and assessed friendlier for aid purposes.

If you determine that your child will qualify for need-based aid, then it usually makes sense to spend down your child’s assets before they are included in any aid calculations. And based on the new “Prior-Prior” rule, this will now have to occur more than two years prior to when applying for aid. 

But what if you determine that your child will not qualify for any need-based aid, meaning that their EFC is greater than the cost of attendance?  If that’s the case, then it wouldn’t matter if your child had a million dollars of assets. At that point you need to shift gears in your planning strategy and focus on merit aid.

Merit Aid is based on your child’s academic, athletic, music and other ability, not family finances. The great thing about merit aid is that it typically comes in the form of grants and scholarships and has nothing to do with your income or assets.

The key is to find colleges where your child will be viewed favorably from an admissions standpoint. Since most colleges, especially the elite colleges, do not offer merit aid you’ll have to do your research to determine which ones do.

Financial aid is only one part of “college planning”. Start saving early and often in tax advantaged accounts such as 529 plans. As college approaches, focus on college selection to determine where your child will fit in best from a cultural, financial aid and future employment perspective. Lastly, don’t forget tax aid and how to best use your personal resources to pay your share of the cost.

This might sound comprehensive and it should be. Some private universities now cost nearly $70,000 and the average student is graduating with nearly $35,000 in student loans. You need to plan for what could be the biggest investment you ever make.     
 
PLEASE CLICK TO WATCH MY VIDEO ON COLLEGE SAVINGS PLANS 



Thanks for visiting Tushingham Wealth Strategies. Our goal is to help business owners proactively oversee all of their financial affairs by serving as their “Personal CFO” and fiduciary, so that they may live their ideal life worry-free. As part of our "Personal CFO" service, we help families develop "late stage" college planning strategies so that they can save money on college, protect their retirement assets and help their children graduate with minimal student loans. This is why our “Personal CFO” services integrate college and retirement planning into one strategy.

Tws logo reverse bluebkgd
Ico insights

INSIGHTS

SPONSORS' CONTENT
Infinity 891835159

Get to Know Infinity Payment Systems

Kyle Thorpe - Infinity Payment Systems
Hinnant

Intellectual Property Can Add Value to Your Hospitality Business

Chris Hinnant - Barnwell Whaley Patterson & Helms, PLLC
Dave hoff heashot 300x300

The Exit Room: A Simulation Made for Learning Agility

Dave Hoff - EASI Consult

Trending News

Open For Business: New Announcements (Sept. 21)

Johanna Cano - Sep 21, 2018

SBA To Set Up Shop At Wilmington Chamber

Christina Haley O'Neal - Sep 21, 2018

The Future After Flo

Cece Nunn - Sep 21, 2018

Scenes From Hurricane Florence

Michael Cline Spencer - Sep 21, 2018

Health Providers Give Recovery Updates

Ken Little - Sep 21, 2018

In The Current Issue

Investing In Affordable Housing

A recent high-dollar deal in Wilmington represents not only a little more affordable housing in the city but also a good investment for the...


Love, Lydia Bakery Moves In

Lydia Clopton opened Love, Lydia in July at 1502 South Third St. The location was previously a home that was remodeled into the bakery....


The Future After Flo

Hurricane Florence will go down in history as a disaster that tested the ability of a hurricane-prone region to cope. Even before Hurricane...

Book On Business

The 2018 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2018 Power Breakfast - Dishing on the Restaurant Biz
2018 WilmingtonBiz Expo - Keynote Lunch with Eric Dinenberg, Rouse Properties
2017 Health Care Heroes