In the past, settlement proceeds for minors and young adults have often been used to pay for college tuition and expenses. Unfortunately, this often had the affect of disqualifying them from federal financial aid which can be used to pay for college tuition and other expenses, thus decreasing the balance of their settlement funds unnecessarily.
Examination of the “Free Application for Federal Student Aid” (FAFSA) form reveals that certain investments are included and others are excluded for purposes of determining eligibility for financial aid. The FAFSA form can be found here.
When completing the FAFSA form, you need to disclose all investments which include any settlement proceeds deposited in a number of different investment vehicles. The FAFSA form states,
“Investments include real estate (do not include the home you live in), trust funds, UGMA and UTMA accounts, money market funds, mutual funds, certificates of deposit, stocks, stock options, bonds, other securities, installment and land sale contracts (including mortgages held), commodities.
Investments also include qualified educational benefits or education savings accounts (e.g., Coverdell savings accounts, 529 college savings plans and the refund value of 529 prepaid tuition plans).”
The good news is that annuities are not counted as an investment which will disqualify you from federal financial aid. For minors and others who would otherwise qualify for student aid, the use of annuities such as structured settlements, fixed indexed, fixed income, deferred income and immediate annuities are now more than ever a valuable settlement planning tool.
Legacy can maximize your settlement dollar by properly allocating settlement proceeds into a variety of solutions so your settlement can now be used for other needs instead of funding college.
