Risks of transfering a tax-advantaged education account to make someone eligible for SSI?

Question

I have a cousin with three children. One of these children suffered an injury and is severely disabled, resulting in significant financial hardship for the family. Extended family who are better off have assisted in several ways, including contributing to a 529 account for the children's future education. The family is also applying for Supplemental Security Income (SSI) from Social Security.

Unfortunately, the 529 account is in my cousin's name which makes it count as assets on hand for purposes of figuring SSI eligibility. The idea has been suggested to move the account to be owned by someone not in their household to remove it from the SSI calculation and my name has come up.

My concerns are these:

• Is there a risk to me by accepting ownership of this account? E.g tax liability from a large "gift" or implications for college savings funds for my own children?
• Is there a risk to my cousin by me taking ownership of this account? We can assume that I'm honest and reasonably responsible. Situations that might seize my assets should be remote, but far from impossible.
• Is there a risk of fraud accusations? Transferring the account to my name would be for the express purpose of taking it out of my cousins balance sheet. I do not contribute to the fund and it would never be for the benefit of me or any in my own household.
• Is there anything else I'm not considering?
• What is the right kind of professional to ask about this? At the moment, I'm thinking either lawyer or CPA, but I have no relationship with either right now.

Answer 1

What is the right kind of professional to ask about this? At the moment, I'm thinking either lawyer or CPA, but I have no relationship with either right now.

You need to ask your relative what professional gave them this advice. There are experts that can help families navigate all the rules, regulations, programs, and forms when dealing with getting government aid. You need to know the qualifications of the professional who is providing the roadmap.

You have several avenues of exposure:

• Taxes. This may mean you have to pay more either right away or sometime in the future. Some people may be willing to see this extra tax as their contribution to the family needs.

• Legal. If the actions are viewed by the government programs as an attempt to deceive the program, then you could be viewed as an accomplice.

• The transaction could be reversed at a later time. If the government requires the transactions to be reversed, because they can claw back the funds.

Once you have the information from a professional, then find somebody with similar qualifications that can answer your question. If the family doesn't have a professional they are using, then ask their local government social services for a list of local professionals who can help.