Is your 529 plan safe from creditors?
North Carolina law exempts contributions to 529 plans from the reach of creditors. Recently a bankruptcy court called 529 plan exemptions into question, ruling that a grandparent's $40,000 contribution to a 529 plan owned by their child could be seized by the child's creditors in bankruptcy.
In In re Bourguignon (.pdf), the debtor's mother contributed 40k to the 529 plan the debtor set up for the debtor's kids about two weeks prior to the debtor filing bankruptcy. 
The entire 40k was reached by the bankruptcy court and used to pay the debtor's creditors, leaving NO MONEY to pay for college!
As the court noted, it is the timing, not the source of the funds that determines whether it is property of the estate. The Bourguignon court explains why 529 plans enjoy only limited protection under bankruptcy law. Note the court's analysis is under 11 USC 541, which is property of the estate, not the exemptions and opt out provisions under 11 USC 522.
North Carolina is known as an "opt-out" state, which means North Carolina residents who file bankruptcy must use the exemptions provided by North Carolina law, not the federal bankruptcy exemptions. Under North Carolina law, only $25,000.00 of a 529 plan are exempt from the account owner's creditors. No amounts placed in a 529 plan within the 12 months preceding bankruptcy are exempt.
The asset protection issue could be solved simply by having a trust or llc be the account owner of the 529 plan. Where there are actual or anticipated large gifts to a 529 plan, it would be wise to set up a trust or llc to protect all funds within the 529 plan from creditors, not just the amounts protected under the Bankruptcy Code and North Carolina law.
