Mutual fund causing problems. Please help!?

Question

My husband setup a mutual fund for his son when the boy was 10 years old. Because the fund had continued to lose money over the years and since he started college last year my husband decided to withdraw the money and give it to his son to use for school. However, at the time his son was very disrepectful during another situation in which we were trying to help him so we decided the money would be set aside and we would give it to him as he needed. He moved into an apt a couple of months ago and we gave him almost half of the money. It's not much...about $750.

We started doing our taxes and realized the 1099 was in the son's ss# and we could not claim it. We told his son about the fund and explained that he would have to claim it. Well, he blew up and thinks we are not claiming it as some benefit to us. This is not true since it was a loss we would actually get money back. Sorry for the long explanation. Will claiming this cause my stepson to lose his federal financial aid?

Answer 1

It will be counted as income for him on the FAFSA. I'm not sure how it will end up, but it will probably lower the amount of aid, but not by more than half the value of the 1099.