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Grandparent Contributions to a 529 College Savings Plan — Medicaid Risks — Part 2

This issue of the Koldin Report E-Newsletter continues the review of grandparents contributing to a 529 plan for their grandchildren.

In the last issue, we discussed the Medicaid consequences of 529 plans if a grandparent required long term care in a nursing home. If a grandparent owns a 529 plan account for the benefit of a grandchild, the Medicaid agency will consider this account as belonging to the grandparent and require that it be cashed in and spent towards the grandparent’s cost of care. On the other hand, if a grandparent contributes to a 529 plan owned by the grandchild’s parent, the account would not be considered available to the grandparent and therefore protected from the grandparent’s cost of care. Therefore, for Medicaid asset protection planning, grandparents should consider contributing to 529 plans owned by the grandchild’s parent rather than the grandparents owning the 529 plan account themselves. However, the contributions to the parent’s 529 plan would then be subject to the Medicaid 5 year lookback transfer rules. There are other issues that should be considered after consulting with your accountant and financial planner. Some examples of issues to consider are: **Would the funding of the 529 plan owned by a parent of the child cause the child to lose potential financial aid? **Would the grandparent have greater tax advantages if he/she owned the account or if he/she funded an account owned by the child’s parent? **Should the grandparent consider making outright gifts to many family members to reduce the size of his/her estate for estate tax planning purposes? **Should the grandparent pay college tuition directly to the school in addition to or instead of funding 529 plans? The Koldin Law Center believes that effective estate planning involves collaboration with the attorney, financial planner and accountant to cover different viewpoints as to what is best for the client. We encourage our clients to include their family attorney, financial planner and accountant in consultations with our office. At the Koldin Law Center, P.C. with offices in Syracuse , New York, we have over 40 years of experience helping individuals plan for immediate crisis and long term care. Our attorneys are available to discuss your estate planning options including making contributions to a 529 College Savings Plan. There is something you can do.

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