Your August 2013 Special Needs News e-mail mentioned potential complications from UTMA accounts. We hadn't even thought of this before. Our son has an account with a little over $1,000 that his grandfather set up years ago. Should we close it out so that it wouldn't potentially interfere with our son's SSI eligiblity in the event of our untimely demise? We also have two California Scholarshare 529 college funds that total about 14K, with our son listed as the beneficiary. Could these cause complications also? Thanks!
We are pleased to receive your questions and respond. They are very solid, logical questions.
If there is a Uniform Transfer to Minors Act (UTMA) account holding money for your son, that money becomes his at age 18 or 21. If that account plus other assets exceed $2,000, his eligibility for government benefits could be jeopardized. Generally speaking, such accounts are not a good idea and should be closed. Funds can likely be spent for any of his needs, thereby eliminating the problem.
You also ask about 529 college plans. If either of you is the owner or custodian of the account, it should not interfere with your son’s eligibility. Since he is the beneficiary, distributions for educational purposes could be considered gifts. If your son receives the money and spends it on college expenses before the end of the month in which it is received, it will not interfere with eligibility. Alternatively, make payments directly to the college or university so that it never enters accounts established for your son’s benefit.
In simply summary, UTMA accounts should generally be avoided while 529 accounts can be compatible with ongoing eligibility if properly managed.