Should Your 529 Plan Be Included in Your Trust?

If you've established a 529 plan for a child or grandchild, you may wonder whether it should be included in your estate plan or transferred into your trust.

The answer surprises many people.

In most cases, a 529 plan does not pass through your trust. Instead, it follows the rules of the account itself. That means simply creating a trust does not automatically affect how your 529 plan will be managed if something happens to you.

Understanding how your 529 plan fits into your overall estate plan is an important step in making sure your educational goals continue to be carried out.

How a 529 Plan Passes After Your Death

Unlike many other assets, a 529 plan is governed primarily by the account agreement and the rules established by the state's 529 program.

Rather than becoming part of your trust, the account is typically transferred to a successor account owner if one has been named. That person takes over management of the account and continues using the funds for the benefit of the designated student.

If no successor owner has been named, the process can become more complicated and may depend on the specific rules of the state's 529 plan.

For that reason, naming a successor account owner is one of the most important steps you can take.

What Is a Successor Account Owner?

A successor account owner is the person who assumes responsibility for managing the 529 plan after the original owner dies or becomes unable to manage the account.

They do not become the beneficiary of the funds. Instead, they simply take over ownership and continue administering the account according to its terms.

Without a successor owner, your family may face unnecessary delays or administrative complications at a time when they are already dealing with many other responsibilities.

How Your Estate Plan and 529 Plan Work Together

Although a 529 plan generally does not become part of your trust, it is still an important part of your overall estate plan.

Your estate plan should coordinate with all your assets, including retirement accounts, life insurance policies, bank accounts, and education savings accounts.

Reviewing account ownership, beneficiary designations, and successor owners helps ensure everything works together the way you intend.

Should You Put a 529 Plan in Your Trust?

For most families, the answer is no.

Instead of transferring the account into a trust, focus on making sure the account is properly titled, a successor account owner has been designated, and your overall estate plan reflects your wishes.

A trust and a 529 plan each serve different purposes. When both are properly coordinated, they can work together to help accomplish your family's long-term goals.

Review Your Plan Regularly

As your family grows and circumstances change, your estate plan should change with it.

If you have established 529 plans for children or grandchildren, now is a good time to review your account's ownership, successor designations, and overall estate plan to ensure everything still works together.

The attorneys at Wagner Oehler can help you review your estate plan and make sure all your assets, including your education savings accounts, are coordinated to carry out your wishes.

Take the Next Step

If you’re ready to start being proactive about your estate plan and want guidance tailored to your family, assets, and goals, contact Wagner Oehler, Ltd. to get started.

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