If your mother applies for Medicaid, the 529 plan could be considered an available asset. This means money in the 529 account must be exhausted before Medicaid will pay nursing home bills. In addition, spending the money in the 529 account for medical bills instead of for college will trigger deferred taxes, plus penalties of 10 percent (or up to 20 percent in some states) that apply if the money is used for something other than education. In order to prevent this, your mother could transfer the plan to you. However, this may trigger a Medicaid penalty period because it could be considered a transfer of assets. To find out the best solution for your family, contact an elder law attorney in your state. Here is a directory of attorneys: http://www.elderlawanswers.com/elder-law-attorneys.
For more information about 529 plans, click here.
For more about Medicaid’s asset transfer rules, click here.
For more about Medicaid’s asset rules, click here.