Saving for college but needing to receive Medicaid is a complicated equation.
The answer “It depends” is not much of a comfort when considering how college savings accounts will be treated for Medicaid purposes. However, it is, unfortunately, the most accurate answer. There are several factors that must be considered:
529 plans are a great way to help parents with taxes and college costs. Grandparents, aunts and uncles and anyone who wants to pitch in, can also benefit.
Starting to put aside money in a 529 college plan when children are very young, is a wonderful way to push yourself to save over an extended period of time, with some added benefits. Your kids get the advantage of having more funds to draw on for college, and you get an investment that grows tax free. It’s a good deal for everyone.
The Green Bay Press Gazette’s recent article, “Benefits of 529 college savings plans keep giving,” reports that the state of Wisconsin’s 529 plan is called the Edvest College Savings Plan.
Unlike previous generations, the baby boomers are more concerned with having enough money to last through their retirement years than with leaving substantial assets to their heirs and to charities. But they are still concerned with leaving a legacy for their children and grandchildren. A new definition of a legacy is not based on dollars, but on family memories and shared values.
Money isn’t the only definition of legacy, according to the US News article titled “How Boomers Are Redefining 'Legacy.’” Baby boomers realize that their top priority is to have enough assets to support themselves, but are starting to redefine “legacy” in the process. For some individuals, it means giving away some money now. For others, it’s restructuring some assets to leave a financial inheritance. For most, the process of aligning their assets with their priorities means the opportunity to create non-financial legacies.
Rethink how you label the financial help you're giving now to your next generation. Are you helping them out with college tuition? Helping with the living expenses of a slow-to-launch millennial by having them stay at home or by covering some bills is not uncommon. About 62% of Americans 50 and older are providing financial support to family members, according to a recent study. The study found that the subsidies averaged $15,000 over five years, but also increased with the givers’ resources. You’re allowed to give away $14,000 per recipient, per year, without triggering any tax penalties or disclosures … more than that and the person who gives has to complete a gift tax return. Also, the gift tax is deducted from your lifetime cap on tax-free gifting.
Some high-net worth families still face the challenge of reducing their estate to minimize or eliminate estate taxes, although the federal estate tax exclusion is currently larger than it has ever been. The portability of unused exclusion amounts are at $5.43 million for individuals and $10.86 million for couples. But a 40 percent top estate tax rate on amounts above the exemption concerns those with large estates.
High-net worth individuals managing their estates are better off working with an experienced estate planning attorney, The Marietta Daily Journal confirms in a recent article, titled “Estate reduction ensuring wealth transfer to heirs.” With the changes in estate and gift tax laws, have an expert on your side to ensure your documentation is drafted properly and work with your financial advisor to plan asset transfers to heirs.
An easy move for wealthy families is gifting. Individuals can gift up to $14,000 per year, per individual without incurring a gift tax. The amount doubles for spouses. There’s an informational gift tax return to be filed, but there’s no tax due if the gift is under the annual exclusion limit.
Houston Estate Planning and Elder Law Attorney Blog