Question:

Our son is a junior in high school, and we hope to send him to a top private college. Our income is now about $100,000, but the last couple of years have been difficult, and we have little saved. We will need financial aid.

As you've suggested, we are going over our finances before the end of the year to make sure we'll qualify. We know financial aid gets cut when middle-income families have savings in their child's name. Our son has nothing, but his grandmother gave him her home a couple of years ago so it would stay in the family if she went into a nursing home.

It's not expensive, but on a lake and full of family memories. Will that matter for financial aid?

- M.R.
Answer: You are wise to be going over your family finances now because Dec. 31 of a child's junior year in high school is a crucial date that cannot be ignored.

After that, you will be in the tax year that will give the snapshot of your finances that must be sent to college financial-aid offices. If you sell stocks, bonds, mutual funds, or property to pay for college after Dec. 31 of this year, any money you make will be reported on that tax return, as well. And with gains from investments, plus income from a job, your aid could be sliced.

I say could because at many public colleges and some private ones, you are not going to qualify, based on your income, for much aid beyond loans. On the other hand, at top private colleges even people with incomes of $100,000 can qualify for financial aid. And grants, if you can get them, are a great deal, money that never has to be repaid.

But now, the bad news: Property in your son's name is probably going to be poison for financial aid, even if Grandma is living there and your son won't touch it for years. Unfortunately, too many families get into messes like this when estate-planning attorneys, CPAs, and financial planners give advice that's good for one generation but not the other.

Often, grandparents are told to set up Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) accounts for grandchildren that can undermine financial aid. Families that discover the mistake can sometimes spend the damaging accounts before filing for financial aid, but homes are a more complex matter.

Grandparents transfer homes to children so the property stays in the family rather than being liquidated to cover nursing-home costs. An indigent person, after all, can get Medicaid for nursing homes. Yet the result is that the grandchild looks rich on paper, and colleges take the position that assets in a child's name can be sold and used to pay for college.

With a $200,000 home, a private college might take the position that the student should contribute $50,000 of its value each year, said Kalman Chany, author of Paying for College Without Going Broke.

You could go to a lawyer and change the ownership of the property, but that can be costly and end up with unwelcome results, said estate-planning attorney Ben Neiburger. If, for example, you transferred the property to an uncle, assuming he'd return it to your son someday, he might have second thoughts later.

Chany's advice is to leave a transaction this complex alone and pursue an alternative. Rather than going after financial aid based on need, he said, look instead for colleges that provide merit aid, or grants used to recruit attractive students.

Sometimes, people assume their child won't get merit aid because he or she isn't a sports star or an A student. That is a correct assumption if your child is focused on top-tier elite private colleges. But schools listed in the second and third tiers of the U.S. News & World Report's Best Colleges rankings often provide aid to students who have a talent the school needs or SAT or ACT test scores above the average at that college.

To enhance chances for merit aid, have your child apply to numerous private colleges. He is likely to be more attractive to schools in states far from your home, and if his ethnic or racial background, extracurricular activities, or college major is different from those common at that school.

Gail MarksJarvis is a personal finance columnist for the Chicago Tribune. E-mail her at gmarksjarvis@tribune.com.