quote:Originally posted by Brawnko:
I met with the school FA person. I used an example. Let's say I live in a 10M home paid for and my business was owned by an ESOP retirment plan. I sold my business for 20M in 2010. I took enough income in 2010 to live for 4 years so I don't have any income in 2011. I am worth 30M and my kid would get free college! She said "that is just their criteria to not count retirement or home....
I have pondered this for several days....mostly wondering what it would be like living in a paid-for 10M house!
But for those that may read throught this thread in the future:1) Assuming you kept the proceeds from the sale of your business farm in a retirement vehicle, drawing out living expenses for 4 years would be a taxable event from a non-Roth retirement plan, plus penalty if you are not of retirement age. You would would need to add about ~15-20% ? more to cover the tax.
2) The 4 years of living expenses would need to be put in a non-risk account, which today would draw about 1% interest. I can only guess what yearly living expenses would be for a family living in a 10M house, but the real estate tax would be ~$95,000 yearly in my county. Add in a new (luxury) car or two in those 4 years, upkeep to the estate, and travel expenses to see your son play in college plus other living and college tuition expenses.....let's just assume you would need $250,000/yr or $1,000,000 for those 4 years. In the safe, 1%, account that would generate about $10,000 in interest (dominished yearly), which is part of the AGI for the FAFSA. Plus, the $1M sitting in the interest bearing account for household expenses, now is a parent asset of which <6% is considered available for college ($60,000 the first year).
3) Some/most private schools require the CSS profile which could include the equity in your home ($10M).
In your example, it really doesn't look like your son could go to college for free. The financial aid representative gave you the correct answer, but there is WAAYY more to it.
Here is a link I found of ways to maximize financial aid legally:
http://www.finaid.org/fafsa/maximize.phtml