For most parents providing for their children's education is of utmost importance. Many parents in Maryland and other states have opted to utilize 529 plans in order to save money for their children's education. These plans are education savings plans which enjoy a variety of tax-advantages. Although these plans are effective, there may be problems during estate administration if parents fail to name a successor.
Failing to complete this important estate planning task can risk having a stranger controlling the children's education funds after their parents die. Most parents would prefer to have somebody they know and trust in charge of their children's future. Naming a successor specifies which person will legally have control over the funds of the 529 account after parents pass away unexpectedly.
On the other hand, even parents who name a successor may still risk the chance of a chosen successor deciding not to follow the wishes of the parents. The successor will have all the rights of a regular account owner, which means the successor can make decisions regarding how funds are invested. The successor will also have the power to decide how the intended beneficiaries can use the money in the education fund account.
For these reasons it is important that parents in Maryland think carefully about who they decide will be a successor of a 529 account. Additionally it would also be beneficial to prepare other aspects of estate plans as soon as possible before something unexpected occurs. However, each situation is different and not every type of estate planning instrument will work for every situation. Therefore, it is necessary to have a firm understanding of applicable laws and estate administration procedures.
Source: US News and World Report, "Make College Savings Accounts Part of Estate Planning," Reyna Gobel, May 31, 2013