Coordinating 529 Plan Accounts in Your Estate Plan

At Fleming & Curti, PLC, we think 529 Plan accounts are a great way to help educate your children and (especially) grandchildren. Coordinating 529 Plan accounts in your estate planning is challenging, and important.

There is certainly a big industry of financial planners pushing for you to consider such plans, and we generally approve. But most of the writing about education accounts focuses on selecting among the various options. Less attention focuses on ownership, succession and tax treatment of the plans.

Who should own the 529 Plan account you set up for a child or grandchild? Generally, the person who sets it up will be the owner. The Plan may allow a successor owner who can take over on your death. Note, though, that if a parent owns the 529 Plan account, it may interfere with eligibility for some scholarships or student loans.

Coordinating 529 Plan accounts with your estate planning means, among other things, setting up a succession of ownership. It may also mean allowing the owner to change beneficiaries if, for instance, one child decides not to attend college. It can also be important to consider how the tax-free growth in a 529 Plan account might disproportionately benefit some heirs.

We discuss these — and other — considerations (like the relationship between 529 Plan and ABLE Act accounts) in this week’s Elder Law Issues podcast episode. Join us for the discussion.