What impact will a 529 trust account have on a disabled child’s ability to qualify for SSI and medicaid benefits when she turns 18?

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What impact will a 529 trust account have on a disabled child’s ability to qualify for SSI and medicaid benefits when she turns 18?

My child is only one and has been diagnosed with a syndorme which will qualify her for both SSI and medicaid benefits when she turns 18. However, very generous relatives have opened a 529 account for her, naming her as the beneficiary. What impact, if any, will the existence of the account have on her ability to qualify for said benefits?

Asked on September 19, 2011 under Estate Planning, New York

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

To get specific answers to your question in that I do not know the specific terms of the trust that was set up for your daughter as to whether it is a discretionary trust or a mandatory trust for distribution or if it is revocable or irrevocable as well as the amount that could be distributed, you should contact the Social Security Administration as well as Medicaid about its possible impact for benefits from these two entities to your daughter.

However, when a trust is established for a person who is its beneficiary, payments under it are a gift. Gifts are not reportable income. Income derived from the gift, for example a real estate rental is reportable.

Depending upon the yearly amount of any distribution from the trust set up by the generous relatives as well as the nature of the trust, it may have no impact at all for your daughter to receive the stated benefits that you have written about.

Good question.


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