How Does a 529 College Plan Affect Charlotte Medicaid Planning?

A 529 College Savings Plan is a common college savings plan used by many families to save for future college expenses. These college savings plans were first included in the Internal Revenue Code in 1996 and have many important benefits. One concern that some people have is how these plans might affect their chances of qualifying for Medicaid benefits in the future. Specifically, the concern is that a 529 College Savings Plan may be counted as an asset by Medicaid. Our attorney can help you to include these plans in your overall Charlotte Medicaid planning.

Is a 529 Account a Countable Asset for Purposes of Medicaid Eligibility?

A common concern that clients have is that, if they open a 529 account for their grandchildren, will they still be able to qualify for Medicaid long-term care benefits if they need to go to a nursing home? The answer depends on a variety of factors that your Charlotte Medicaid planning attorney can help you determine. In some states, a 529 College Savings Plan is considered a countable asset.

A 529 College Savings Plan allows you to regain possession of the funds. That means the funds in the account are considered countable assets that should be used in paying nursing home and other expenses under Medicaid. One strategy is for someone else to be the owner of the 529 account. Ask our Charlotte Medicaid planning attorney if you have more questions.

What happens to a 529 plan if the owner dies or becomes incapacitated?

When 529 accounts are created, a successor owner should always be named. By doing so, your 529 account will not terminate upon your death or incapacity. Instead, it will be maintained and controlled by the successor account owner whom you named. This way, ownership of the 529 account can easily be transferred automatically to your designated successor. On the other hand, if a successor owner is not identified, then probate proceedings may be required in order for the court to appoint a successor owner. Some 529 accounts actually incorporate rules of succession that establish what happens if a successor is not named in the event that becomes an issue.

Take Care in Choosing Your 529 College Savings Plan Successor Owner

It is important to remember that any successor owner you choose will assume your rights as the original account owner. That means the successor owner will have the right to request a refund from the account. Be sure you are confident that the successor you choose will follow your wishes as to how the 529 account should be used. If you have questions or concerns about choosing a successor, discuss those concerns with our Charlotte Medicaid planning attorney.

A 529 College Savings Plan Can Be Used Nationwide

One of biggest advantages of creating a 529 College Savings Plan is that it can be used at colleges and universities across the nation. Although every state has its own plan, it can be used at any college in the United States your student chooses to attend. In other words, as a North Carolina resident can invest in a 529 College Savings Plan for their granddaughter and she can use the funds to attend college in Oregon, as long as that institution is eligible under the applicable 529 rules.

Advantages of Using 529 Plans

Creating a 529 College Savings Plan has many benefits. The most obvious benefit is being able to plan ahead. If you don’t plan ahead, expecting to simply pay the tuition when the child starts college, you may pass away before that time and the tuition money may not be set aside.

Using a 529 College Savings Plan may be a better option than leaving a gift because the gift tax exclusion only applies to direct tuition payments.  The gift tax exclusion does not apply to other college expense such as room and board, supplies, and books which a 529 plan will cover. Also, direct payment of tuition can reduce a student’s financial aid award because it will be counted as a financial resource.

Join us for a free seminar today! If you have questions regarding 529 College Savings Plan and Medicaid eligibility or any other Charlotte Medicaid planning matters, please contact the experienced attorneys at The Potter Law Firm for a consultation. You can contact us either online or by calling us at (704) 944-3245 (Charlotte or Huntersville, NC) or for individuals in Kentucky at (606) 324-5516 (Ashland, KY) or at (859) 372-6655 (Florence, KY).