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Parents should plan for college distributions

NAELA National Academy of Elder Law Attorneys, Inc. MEMBER

Considering a child's college education often means setting up a college fund and making plans to add to it periodically so that students will have needed funds when the time comes. However, many New Jersey parents who are conscientious about managing a child's college fund forget that estate planning should also be part of the overall goal to protect college finances. Without a good estate plan, funds can be misused or disappear before a child enters school.

If parents are using a 529 plan, they are at risk of having an unknown person manage their child's college savings if they die. Any college savings plan must have a successor or a responsible adult to manage the plan if the parents are not able to do so. Parents should ask their 529 plan manager for a form to name a primary and secondary successor. Successors have the same rights as the traditional account owner if the owner passes away.

Most parents choose a family member such as their own parent or a brother or sister to manage college funds as successors, although anyone can be named. However, parents should be sure that the person so named is capable and willing to take on that responsibility. Grandparents who open college accounts for grandchildren can name the children's parents or some other person as successor.

Planning for important financial distributions after death is a task that most people avoid, but it is very important to do if heirs and beneficiaries are to avoid significant problems. An estate planning attorney may be able to help those who want to set up a strong estate plan that protects everyone's financial interests and avoids undue taxation and other issues.

Source: US News, "Make College Savings Accounts Part of Estate Planning", Reyna Gobel, May 31, 2013

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