Naming Successors on 529 Plans

529 plans, or tax-advantaged education savings plans, allowparents to submit a form naming primary and secondary successors.  Parents that pass away without naming asuccessor are at risk of having the state assign someone they don’t trust tomake decisions on how to invest the money and how the beneficiary can use the funds.  Or even worse, if the beneficiary is over 18,the beneficiary becomes the account owner and has full power to use theeducation funding for whatever purpose they like.

Parents typically name spouses, close relatives, or trusts assuccessors.  However, some parents decideto have the executor of their will distribute 529 plan withdrawals to ensurethese college savings are used the way they intend.  Whichever option a parent chooses, theyshould be aware of any state restrictions on ownership transferability that maysubject the plan to tax.

See Reyna Gobel, Make College Savings Accounts Part of EstatePlanning, U.S. News, May 31, 2013.