MG: Whether grandparents contribute to a 529 account they own or to a parent-owned account, the contribution is a gift to the account beneficiary. For contributions over $14,000, the grandparent may elect to treat up to $70,000 of the contribution as a gift made over a five-year period. This election allows the grandparent to “front-load” contributions into the 529 plan without exceeding the $14,000 annual gift tax exclusion. For example, a grandparent could make a $70,000 contribution to a grandchild’s 529 account in 2015 and avoid the gift tax as long as the grandparent does not make any other gifts until 2020. And it’s possible you could contribute even more (the lifetime gift credit is currently $5.43 million). We recommend discussing the possibilities with a financial advisor.

RK: What if the grandparent needs to enter a nursing home or is seeking Medicaid to cover medical expenses?

MG: Many grandparents wonder whether 529 monies are counted among their total assets should they need nursing home care or Medicaid benefits. The answer is “yes” in most states, but it’s really no different than the treatment applied to IRA assets, for example. The government will ask that you use your own money to provide care for yourself before it will pay for your care. Taxes (and potential penalties) will vary by state. There are ways to manage this, however, and we always recommend speaking with a tax or legal professional.

One final point: If you decide to transfer the 529 account to someone else’s name or even if the assets are used by the beneficiary for college, be aware of “look-back” rules. This means the government can look back a certain number of years on that activity when determining Medicaid eligibility.

RK: I hate to ask, but what if the grandparent passes away?

MG: The 529 account does not end or terminate upon death of the owner. Most, if not all, 529 account applications suggest the owner name a successor owner upon death. So the account will continue under the new owner chosen by the grandparent. If a successor is not designated, a new account owner may have to be decided through probate.

RK: And your sister, did she opt for the horse or the 529?

MG: She bought the horse, but she tells me she is still going to open a 529. She’ll be hearing from me again.

Rob Kron, Managing Director, is the head of Investment and Retirement Education for BlackRock’s U.S. Wealth Advisory group. He provides practical information on topics that are important to every saver and investor of every age.