Consider liquidating your assessable investments and re-investing in non-assessable assets (e.g. annuities, qualified retirement accounts, and life insurance) to reduce the assessable assets to the Asset Protection Allowance amount. If income or gains must be recognized to convert the investment to a non-assessable asset, do so in a year prior to reporting on the financial aid forms. Check the schools policy regarding the assessment of annuities and life insurance as some schools may include these assets.
Specific Details
Donna and Hank have $179,700 of assets that are considered in the financial aid formula. Their asset protection allowance, based on Hank’s age, of 50 is $6,300. Donna and Hank decide that they would like to increase their retirement nest egg and also increase their financial aid eligibility so they transfer $173,400 of their assets to an annuity. Since $173,400 will no longer be included in their financial aid assets, financial aid eligibility will increase by $9,710 per year.
Potential Savings
If you are in a financial aid asset assessment rate of 5.6%, you could increase your financial aid eligibility up to $56 for every $1,000 of asset reduction by repositioning assets.