A 529 plan is a very common planning technique used by grandparents to fund a grandchild’s college education. Simply stated, contributions to a 529 plan grow tax-free over the life of the plan and if used for qualified tuition costs, the distributions from the plan are also tax-free.
Notwithstanding the beneficial tax treatment of a 529 plan, they are not given favorable treatment under the Medicaid rules. If you are the owner of a 529 plan, seeking eligibility for Medicaid to cover the cost of your care, whether at home or in a nursing home, the value of the 529 plan is treated as your asset.
This could have a disastrous effect on your plan to help finance a grandchild’s college education. If you are someone who intends to assist a grandchild through college, you may want to consider alternatives to owning a 529. One viable option would be to transfer the money to your child who can then contribute the funds to a 529 plan owned by him. Moreover, in New York, your child might benefit from a deduction on his tax return which, depending on the amount and type of income you have, might not benefit you.
Please contact us to discuss your planning options. We can be reached at 914-925-1010 or by e-mail me at firstname.lastname@example.org. You can also visit our website at www.plantodayfortomorrow.com.
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