A recent question has arisen regarding whether or not assets
held in a 529 College Savings Plan (“Qualified Tuition Program”) for the
benefit of a beneficiary who is disabled over eighteen years of age will be
treated as a “resource” by either or both SSI (Supplemental Security Income) or
Medicaid.
Some parents establish a 529 Plan for a young child in
anticipation of saving for the child’s future (and the presumed need for)
post-high school education expenses at a college or university. Years later, due to illness, injury,
developmental delays, or disabilities, it may become apparent to the parent that
the child would not likely be able to attend college or university but instead
does then, or shortly will, need to apply for and receive public benefits like
SSI and/or Medicaid. Will those funds held
in a 529 Plan contributed by the parents (or others) now hinder, or even
prevent, the beneficiary from being able to obtain SSI and Medicaid, if the
beneficiary would otherwise qualify for those benefits??
Social Security has issued a POM which addresses how College
Savings Plans are to be treated by the SSA.
The POM is found at SI 01140.150,
entitled “Qualified Tuition Programs” (QTPs).
Included in the provisions of this POM is the specific finding that,
since the 529 is deemed to be “owned” by the person establishing the account,
it is therefore not owned by the beneficiary and, therefore, should not
be deemed a resource of the disabled beneficiary. This is great news for the beneficiary. In fact, the parent (who is normally the
custodian of the account) can use the funds to benefit the beneficiary in
certain circumstances for educational needs without having the transfer the
assets into an ABLE Account (see blog
post), or into another alternative, such as a Medicaid Payback Trust [e.g.,
(d)(4)(A) or (d)(4)(C)].
In addition, the 529 Plan does not require any “Medicaid
payback” to the state Medicaid program since the assets held in the 529 Plan
are not deemed to be owned by and are not, therefore, “resources” of the
beneficiary.
The recently passed “Tax Cuts and Jobs Act” expanded the use
of 529 Plans for expenditures for K-12 tuition, thus making the assets
available for educational purposes of a younger disabled person who may not
qualify for college or university. After
completion of whatever educational needs the beneficiary has, the new tax act
does allow 529 Plans to be rolled over into an ABLE account.
Using the funds in the 529 Plan to benefit the disabled
beneficiary, without damaging the beneficiary’s public benefits and without
incurring a Medicaid “payback” at the death of the beneficiary, is a two-fold
benefit, a real “win/win.”
Curtis J. Shacklett, Esq.
Barber & Bartz, P.C.
525 S. Main St., Ste. 800
Tulsa, OK 74103-4511
Telephone: (918) 599-7755
Facsimile: (918) 599-7756
Email: cshacklett@barberbartz.com
Website: www.barberbartz.com
