What happens when the owner of a 529 plan dies?
What happens when the owner of a 529 plan dies?
When the account owner dies, the terms of the 529 plan will control who becomes the new account owner. Alternatively, the account may be considered part of the account owner’s probate estate and may pass according to a will (or through the state’s intestacy laws if there is no will).
Can a 529 plan be transferred to another owner?
529 education savings plan accounts can be transferred from one beneficiary to another eligible member of the family or rolled over into other 529 accounts for the same beneficiary or an eligible family member. You cannot change the beneficiary of a 529 account funded with custodial assets.
Are 529 plans subject to PA inheritance tax?
The only 529 plan that is exempt from Pennsylvania inheritance tax is the College Career and Savings Program Account program, controlled by the Pennsylvania Department of Treasury. All other 529 plans are subject to Pennsylvania inheritance tax.
Who should be the account owner of a 529 plan?
Generally, the same person who contributed the money controls the Section 529 account. This doesn’t have to be the case, however. Someone else, such as a grandparent, could make a donation but name the child’s parent as the account owner, or a parent could establish the account and allow others to contribute to it.
Can the owner of a 529 also be the beneficiary?
Remember that as the account owner, you’re not the beneficiary. But if you’re transferring 529 plan savings to someone else, you can choose yourself or your spouse to be the beneficiary going forward. If your child has a step-parent, they can also be named as a beneficiary.
What is a successor account owner?
Simply put, a successor owner is a person that you designate to become the new owner of your 529 and assume its management in the unfortunate event of your death or inability to physically or mentally continue the administration of account.
Are 529 plans exempt from estate tax?
The money in a 529 account is exempt from federal estate tax. In other words, the amount saved in a 529 account does not count toward your taxable estate. As a result, placing money in a 529 account can reduce your federal estate taxes, or even help you avoid the estate tax in the first place.
Can a trust be a successor owner of a 529?
Naming a successor account owner lets the 529 plan account transfer to the successor without having to go through probate, which can cause delays. If you do not like the idea of passing ownership along to another individual, you may wish to consider naming a trust as successor owner.
Can a 529 beneficiary be successor owner?
Are non-PA 529 plan accounts subject to PA inheritance tax?
Yes, non-PA 529 Plan accounts are subject to PA Inheritance Tax. The “owner” of a 529 Plan (the grandfather in your question, perhaps) is called the “Account Holder.” 529 Plans usually ask for the Account Holder to name a ‘Successor Account Holder.”.
What happens to a 529 plan when the owner dies?
If a 529 plan account owner dies, the account will continue under a new owner. If no successor owner is named, the new account owner may have to be decided through probate. Whether or not a 529 plan account is subject to estate tax or inheritance tax depends on which state the grandparent lives in and which 529 plan they use.
Can a successor account owner change the beneficiary of a 529 plan?
The successor account owner also has the right to change the beneficiary. A stepparent might use your 529 plan to fund his or her own children’s college education, as opposed to your own.
Can a spouse be the sole owner of a 529 plan?
(A very small number of 529 plans permit spouses to establish the account as joint owners.) Pick a successor account owner who you can trust to fulfill your wishes. For most 529 plans, the rights assumed by the successor include the right to request a refund of any or all account assets (subject to tax and penalty on the earnings).
