Need help with FAFSA and life insurance after spouse's passing

Education Forums
1

I’m preparing to file my daughter’s FAFSA for college and could really use some guidance. My spouse passed away in April, and now I’m trying to figure out how to handle life insurance proceeds and mixed accounts on the FAFSA. Here’s the situation:

  1. The life insurance payout was added to our existing savings and brokerage accounts, which aren’t retirement accounts. I’ve heard conflicting advice about whether this impacts FAFSA calculations.
  2. One college said I should file the FAFSA ASAP using 2023 tax info, while another suggested waiting until 2024 taxes are done. I’m not sure which is the better move.
  3. I just learned that life insurance isn’t considered income for FAFSA, but since it’s in our accounts now, does it count as an asset?

I want to make sure my daughter gets the aid she qualifies for, but this process is so confusing. Any advice or strategies to handle this would be greatly appreciated!

2

First off, sorry for your loss. Life insurance proceeds don’t count as income on FAFSA, but if they’re mixed with other funds, they’ll likely be considered assets. Have you talked to the FAFSA helpline?

3

@Bright
Thanks for the clarification. I haven’t called the helpline yet but might need to if I can’t figure this out soon.

4

@Bright
The helpline is pretty helpful. They can explain the asset rules in detail.

5

You should probably file sooner rather than later. Waiting for 2024 taxes won’t change much since FAFSA uses 2023 tax info for the 2024-25 year.

6

Blayne said:
You should probably file sooner rather than later. Waiting for 2024 taxes won’t change much since FAFSA uses 2023 tax info for the 2024-25 year.

Good to know! I was just worried about getting everything right, but I’ll try to file soon.

7

If the funds are in non-retirement accounts, they’ll be considered assets. Could you use some of that money to prepay tuition or other big expenses?

8

Storm said:
If the funds are in non-retirement accounts, they’ll be considered assets. Could you use some of that money to prepay tuition or other big expenses?

That’s a great idea. I do have some bills I could pay off before submitting the FAFSA. Thanks for the tip!

9

If your financial situation has changed significantly, you can file a professional judgment appeal with the financial aid offices. They might adjust your aid package based on your circumstances.

10

Bao said:
If your financial situation has changed significantly, you can file a professional judgment appeal with the financial aid offices. They might adjust your aid package based on your circumstances.

Thanks for mentioning that. I’ll look into how to file an appeal. It sounds like it could help a lot.

11

It sounds like you’re getting a lot of conflicting advice. Have you considered consulting a financial aid advisor? They might help clear things up.

12

Kim said:
It sounds like you’re getting a lot of conflicting advice. Have you considered consulting a financial aid advisor? They might help clear things up.

Not yet, but I think I’ll need to. This process has been more complicated than I expected.