When 529 Plans are established by a parent or a grandparent for a disabled child or grandchild, it is not considered a countable resource for the child receiving government benefits. However, be careful, because it is a countable resource to the parent or grandparent.
This means that if a parent or grandparent has established this plan for his or her children or grandchildren and then applies for Medicaid, Medicaid will treat this as a countable resource when determining the resource limit.
And as far as the income eligibility goes, the child for whom the 529 Plan was established for only has a beneficial interest in the account but no access to it. Therefore, distributions from the plan directly to the institution for tuition would not be considered income to the child. However, if the money in the plan was used for payment of room & board for the child, then that would be considered In-Kind Support and Maintenance (or ISM) which is countable income to the child.
Finally, if a child under 19 is living with a parent who has established a 529 Plan for that child and the child needs to apply for government benefits, then the money in the 529 plan will be deemed income of the parent to the child.