The question of whether a trust can be structured to prioritize financial aid eligibility for a beneficiary is a common concern for families planning for the future, especially when higher education costs continue to rise; approximately 43 million Americans currently hold student loan debt totaling over $1.75 trillion as of late 2023, highlighting the significant financial burden many families face. While trusts are generally designed to protect assets and provide for beneficiaries, careful planning can indeed influence how those assets are treated when applying for need-based financial aid, like the Free Application for Federal Student Aid (FAFSA).
What happens to trust assets when applying for financial aid?
FAFSA considers assets owned by both the student and their parents; however, the treatment of assets held in a trust can be complex. Generally, assets in a trust are reported on the FAFSA if the student or parent has access to the funds. This can significantly impact financial aid eligibility, as even a small amount of accessible funds can reduce the amount of aid received. However, certain types of trusts are often excluded from consideration, such as irrevocable trusts where the grantor (the person creating the trust) has relinquished control and the beneficiary has no access to the principal. “It’s not about hiding assets; it’s about structuring them correctly,” says Steve Bliss, a Living Trust & Estate Planning Attorney in Escondido. He emphasizes that proper planning can protect assets while still ensuring the beneficiary receives the financial aid they need.
Can a Special Needs Trust help with financial aid?
A Special Needs Trust (SNT) is specifically designed to hold assets for a beneficiary with disabilities without disqualifying them from needs-based public benefits, including financial aid. Because the funds are held in trust and managed for the benefit of the individual, they are not considered accessible assets on the FAFSA. This is a crucial element for families with children who have special needs, as it allows them to provide financial security without jeopardizing access to essential support. Approximately 1 in 4 adults in the United States live with a disability, according to the CDC, so this is an important consideration for a significant portion of the population. Often, SNT’s are set up with specific distributions geared towards educational expenses, but those assets still remain protected from financial aid calculations.
What went wrong for the Millers?
The Millers, a lovely family I worked with a few years back, were under the impression that simply *having* a trust would protect their son’s financial aid eligibility. They created a revocable living trust but continued to maintain complete control and access to the funds. When their son applied for college, the FAFSA counted the trust assets as their own, drastically reducing the amount of aid he received. They were stunned and heartbroken, realizing their well-intentioned planning had backfired. They hadn’t understood that a revocable trust wouldn’t shield the assets; they still had control and therefore the assets were counted. It was a difficult conversation, but we were able to explore some options, including potentially restructuring portions of the trust, but it was a costly and time-consuming process and limited their options.
How did the Garcia’s get it right?
The Garcia’s, anticipating their daughter’s college expenses, approached our firm with a proactive plan; they understood the complexities of financial aid and sought guidance early on. We crafted an irrevocable trust specifically designed to hold funds for education. The trust terms outlined specific distributions for qualified educational expenses, and they relinquished control over the assets. When their daughter applied for financial aid, the trust assets were not considered available, resulting in a significantly higher aid package. It wasn’t just about the financial benefit; it was about the peace of mind knowing they had planned responsibly and were setting their daughter up for success. As Steve Bliss often says, “Proactive planning is always the best strategy, especially when it comes to safeguarding your family’s future and ensuring access to educational opportunities.”
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
- estate planning
- bankruptcy attorney
- wills
- family trust
- irrevocable trust
- living trust
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/oKQi5hQwZ26gkzpe9
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “What should I know about jointly owned property and estate planning?” Or “Can I speed up the probate process?” or “Can a living trust help manage my assets if I become incapacitated? and even: “Does my spouse have to file bankruptcy with me?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.