Speaker 1: Hi, it's Andy Lockwood from Lockwood College Prep, and I wanted to talk today about financial aid and how you can qualify for perhaps more financial aid than you thought you could, so that you can comfortably afford to send your child to the college that he or she deserves. And the title of today's presentation is how to hide your money from the financial aid office. I really should say something like how to hide your money legally and ethically, thanks to the scandals we had. But I want to talk a little bit about the legal ways to shelter your funds from the financial aid formula. So everything I'm talking about here is on the up and up. I don't care if you're wearing a wire or the FBI is hovering over you. This is all kosher stuff. And I want to point out that I've written a free report about exactly this topic that you can get on our website, lockwoodcollegeprep.com report. So here is a brief highlight of that report. So in financial aid, the deal is that the factors that determine whether you're going to qualify or not are numerous. There's about 77 factors, and one of those is your income. There are not a lot of ways to shelter income unless you're self-employed and you have a good accountant and you have legitimate business expenses or you understand certain high-level, but not out of the ordinary, just high-level techniques to keep more of what you earn. So that describes you. If you are a high-income business owner and you don't think you can possibly qualify for need-based financial aid, I'm happy to talk to you about that offline because I am exactly in that situation and it was fixed by my accountant. His name is Rick. So anyway, that's not the topic of today. The topic for today is not income, it's about savings. Because as the Wall Street Journal put it years ago, and I've shamelessly referred to it since then, in financial aid, it's not a matter of how much you have saved, it's where you have that money saved. So there's sort of a hierarchy of savings that penalizes you. Some savings penalize you far more than others, some penalize you a little bit, and some types of savings don't penalize you at all. So I'm going to zip through these, and then if you want some more information, I'm going to, again, direct you to that free report that I wrote up. So the types of savings that penalize you the most are money in your kids' names. I'm talking about specifically UTMA and UGMA accounts. I'm not a financial advisor, so even if I had the ability to go into all the gory details about those accounts, I think I would put you to sleep. So thankfully, I'm not a financial advisor and I can't talk about that stuff too much, but money that you put aside for your kids in custodial accounts will penalize you up to 25% of that amount. So in other words, if you had $100,000 saved in your kids' names in the wrong places, you would lose, in terms of your eligibility for aid, $25,000 per year. Every year you apply for aid. I'm not talking about the 529, I'm talking about custodial accounts. Now the 529 is a separate animal. The 529, under the federal rules, there's two different ways of calculating your eligibility. There's the federal way and there's the private or institutional way. Your college list will dictate, or the colleges on your college list, I should say, will dictate which way they're going to calculate your eligibility. So under the federal rules, the 529 and any savings in your, the parents' names will penalize you at 5.64%, not 6%, not 5%, 5.64%. That same $100,000 saved in a parent's name will not penalize you $25,000, it'll penalize you 5.64%. And for most colleges, they treat the 529 that way. So just a pause here. That's the thing about the 529, it's not whether it penalizes you or not, it's really how much. So the 529 savings account, college savings accounts, were sold and not widely adopted, by the way. And I've read that only 19% of families have a 529. So if you don't have one, you've got plenty of company, but if you do have one, it's actually hurting your eligibility for financial aid, kind of nutty. So most colleges will treat the 529 at the lower level, at the parent level, the 5% and change penalty, but many private colleges, and by the way, I can't prove this, but trust me, I'm on the internet. Most private colleges tend to treat the 529 as a child asset, because you know what, it's money saved for college expenses. So that kind of makes sense, you know, I'm not defending them, but I see the logic there. So the 529, depending on the schools you apply to, will hurt you either a little bit or a lot. So what does not count against you? What are the exemptions? Briefly, there are, I'm going to call it four and a half exemptions. The four things that don't penalize you on the FAFSA, on the federal financial aid application, are in no particular order, your primary residence, I'm not talking about other real estate, but your primary residence should never be disclosed on the FAFSA, the value of it should never be disclosed on the FAFSA, even if you want to, don't do it, because you're going to shoot yourself in the foot. Any retirement accounts, 401ks, IRAs, 457s, you name it, all those things are exempt on the FAFSA, they should never be disclosed. And I'm not making this stuff up, it's in the directions, people don't read the directions because they're very convoluted, but I'm giving you a shortcut right here. And then the last two categories are insurance products, meaning life insurance with cash value and annuities. And when I said 4.5, if you're a business owner, for the most part, the value of your business should be zero. And again, check out the directions, I don't care if your accountant gave you a balance sheet that shows otherwise, if you look at the rules, I'm guessing 99% of the people watching this video who are self-employed will be able to put zero for the value of their business. Now, that's the federal form, I told you before there's two ways or two methodologies to calculate your financial aid eligibility, the institutional way that the private colleges use treat your exempt assets a little bit differently. But that is all explained in my report. So I encourage you to check it out on our website, LockwoodCollegePrep.com slash report. If you're interested in getting in touch with us, you can also visit LockwoodCollegePrep.com and schedule a time to talk to either me or someone on my team. And as always, I recommend you subscribe to this channel so you don't miss out on any more tips that I don't think you're getting anywhere else. That's my hunch. That's what other people tell me. Thanks for watching. Signing off. Talk to you soon. Bye bye. Transcribed by https://otter.ai