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UTMA strategy? 529 college account?


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.

Michael Gilfix

California Families With A Special Needs Child Deserve Better State Support; Role of Special Needs Trusts

According to a study by the Lucile Packard Foundation for Children's Health, California is ranked last in the U.S. when it comes to effective referrals for specialty medical care for children, and 46th in the country for effective medical care coordination.
There are approximately 1 million children in California who have chronic emotional, developmental, and/or physical challenges, and they all need competent, specialized care. The Packard Foundation for Children's Health was founded in 1997 to raise the quality of children's healthcare and improve public access. Currently, more than 40 percent of parents with children who have complex health needs report that they struggle to find the correct medical professionals and getting much-needed appointments with them.
The Packard analysis also found that parents in the state who had a child with special needs reported greater-than-average difficulty finding quality health insurance, consistent child care, medical equipment and transportation, and were more likely to stop working than parents in other states who had a child with special needs. Children in California with complex health needs were less likely to receive all the services they needed, the study found.
The Packard analysis did not tell the California-based parents of children with special needs anything they did not already know; they need a better support system to better support their child.

Parents also need to prepare Special Needs Trusts for their special needs children. In addition to setting aside money for the child – without jeopardizing eligibility for government benefits – such trusts name a “trustee” who serves as an advocate and resource for the child.

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