Do you have a College Savings Plan, aka 529 plan, for your children? By Jennifer Sawday, Partner It may be tough to visualize your little new born or first grader going to college but the truth is before you know it, your kid will be talking college. Most parents dread the financial commitment required for college tuition but this is something that can be planned when your child is a little baby. A college savings plan is very common and there are many reputable financial companies that have great plans. The plans are also known as 529 plans. Why 529? Back in 1996, within the Internal Revenue Code a section titled 529 was created on the types of savings plans. The 529 Plan was named after this Internal Revenue Code specifically focussing on higher education savings – college savings plan. Parents need to understand some fundamental basics and it is important that parents designate a successor owner for a 529 plan. What are some key facts to keep in mind:

1. A 529 plan is generally the preferred method to save money for college for your children or other loved ones like grandchildren, nieces, nephews and so on.
2. You can set up a 529 plan in any state that administers a plan for use for any qualified higher education expenses at any eligible education institution. You do not need to set up a 529 plan under your own state’s plan. You can pick any state’s plan and use that money for ANY qualified educational institution even if not in that state.
3. Qualified distributions from a 529 plan are not subject to income tax where the distributions are used for qualified educational expenses for the designated beneficiary of that particular 529 plan.
4. The estate planning connection: 529 plans are not put into a living trust or have payable on death beneficiaries. Rather, a 529 plan has an account owner and designated beneficiaries. If you are unsure what an estate plan is click here
5. An account owner is the person who opened the 529 plan and can make the distributions on behalf of the designated beneficiary.
6. A designated beneficiary is the person who can receive the benefit of the distributions for qualified educational expenses (generally payments directly for college tuition, books, etc. for higher education).

If you are the account owner for a 529 plan, you should designate a SUCCESSOR OWNER for this plan in case you pass away before the 529 plan is fully exhausted. This successor owner can be another person and may be the trustee of your trust – you will need to confirm with the 529 plan owner if you can designate a trustee of your trust to become the successor owner of the plan if you were to pass away before the 529 plan is fully used for the qualified educational expenses.  You can and should designate a successor owner for a 529 plan that you set up for your children as part of your estate planning.Make sure you choose someone who can manage the 529 plan appropriately and responsibly. TLD Law is an award winning and long established law firm which has a full service estate planning and living trust legal team. They have offices in Long Beach, Downey, Beverly Hills and Irvine. There are other divisions within TLD Law as well from family law, healthcare law, personal injury, business law and much more. The firm in April 2016, re-branded itself from Tredway Lumsdaine & Doyle LLP to TLD Law. For a list of attorneys at TLD Law, please click here. Jennifer Sawday is a partner at TLD Law and is a top notch estate planning attorney. To contact Jennifer Sawday directly, you can email her at [email protected] or call (562) 923-0971. Jennifer offers complimentary consultations for estate planning and living trust matters.