What is a good shelter for property?

divadevaMay 27, 2009

First, please excuse me for asking a property related rather than house-related question. So many readers of this site are experts that I thought it would be a good place to ask questions.Could you help me with this?

We have sold all of our property now (thankfully) except for our (debt-free)home and an inexpensive (under 100K) timber tract which won't be ready for harvest for another 20 years. It's for our retirement. We have a son approaching college age. He's eligible for top schools regarding grades and test scores, but we don't have the income for it in this new economy. His 529 college fund was eaten by the stock market dump. We've run the numbers for financial college aid and we keep tripping over this investment, it boost our assets on paper and reduces aid incredibly. My gut feeling is that this property should be inside some kind of shelter, but what? We need professional help but from whom? What direction should we be steering toward? What questions should we ask? What holding vehicle, etc. should we investigate? Thanks for your help.

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I think you should not attempt to hide any investments for the purpose of gaining more financial aid. Financial aid to you is paid for by all the other kids going to the college who are not eligible for financial aid. The colleges, through their formulas, have arbitrated the fundamental fairness or unfairness of it, and depend on individuals reporting assets fairly. Virtually anyone with assets will have to make the decision to either have their child pay their way, take out loans, or sacrifice assets that could be used for retirement (or attempt to increase current income through employment). While it may be frustrating to you that a person who has no assets and no income can then get a free education, that does not, in my opinion, provide you the right to shield assets for the purpose of getting more college aid.

    Bookmark   May 29, 2009 at 11:05AM
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Not a financial person, so take this for what it is, free advice.

Is it possible to move the timber property into a family trust?

    Bookmark   May 29, 2009 at 6:21PM
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landmarker, if I'm reading the OP correctly, the timber land is not a liquid asset that can be used for college. Are you suggesting it be sold to pay for tuition?
I suggest the OP confer with an account.

    Bookmark   May 29, 2009 at 7:49PM
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Thanks cmarlin, we would sell at a loss right now if we sold the property. A property sale now would pay for less than 2 years of college.
We could swing the tuition payments with a better financial aid package, even with my husband unemployed. I hadn't thought of a family trust. It seems tiny for that, but we'll certainly check it out. Yes, we're planning to see an accountant...I had hoped that someone here would have experience with this issue. I have already learned that the property can't be rolled into an IRA, we should have bought it through an IRA in the first place.
Anyone who has experience with holding land inside a legal vessel, please post.

    Bookmark   June 1, 2009 at 2:02AM
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How does the financial aid office count the property's value--original purchase price, original purchase price plus some sort of appreciation formula, town-assessed value for property tax, or an appraisal of some sort?

    Bookmark   June 1, 2009 at 8:40AM
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I'm not sure an accountant is the right person for you. I suggest consulting a financial planner. Make sure he or she is experienced and credentialed.

    Bookmark   June 1, 2009 at 9:22AM
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Hi Hadley,
I'm not certain...I know that the colleges check the financial information very carefully. The property is waaay outside any town, above the snow line at 4200 elevation and with terrible roads. It's strictly a long term timber investment. This is common in our rural area of California, because of the steep terrain and rugged climate we farm timber instead of other crops. Our house is on a 160 acre timber tract which will also be selectively harvested in 20 years. We live with the bears :). We're fairly unsophisticated about the entire college process, members of our generation have gone to State schools, mostly forestry majors. My husband was in construction until the real estate bust.
I do know, from talking to the college administrators and financial aid officers, that they cannot imagine our lifestyle. Our son is home schooled because there are no high schools, the population can't support them. He drives 3 hours round trip to take classes at a community college.
Thanks, creek side, for a solid suggestion. We will try a financial planner.
Thanks, everyone who posted.

    Bookmark   June 3, 2009 at 12:59AM
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I wonder where Dave is? He would probably know.

The link to his web site is below.

Dave Donhoff

    Bookmark   June 3, 2009 at 10:48AM
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Ask a Certified Financial Planner about an irrevocable trust.

    Bookmark   June 5, 2009 at 10:14AM
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I have an irrevocable trust however do watch out for the tax implications. I can't believe the Street ate up your 529, were you watching these funds?

    Bookmark   June 5, 2009 at 9:14PM
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Hi Bushleague,
Yes, I'd actually put as much of the 529 into bonds as I could, about a third of it, right before the big crash. But the fund limits what we could move, so half of the fund disappeared. We've seen a lot worse, talking to our friends who also have children graduating. People who aren't facing college costs and admissions limits just don't know what it's like now. We're lucky in that DS has some merit/academic scholarships. Anyway, this is very off-topic for this forum.
Thanks, everyone who posted.

    Bookmark   June 12, 2009 at 3:11AM
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