What Happens When A 529 Account Owner Dies?
It’s one of those questions no one wants to think about when it comes to 529 plans: What happens when a 529 account owner dies?
When creating your Ohio’s 529 Plan, you have the option of adding successor owner to your account. What’s a successor owner and do you really need one? Yes, you should assign a successor owner to ensure your college savings account will be used according to your wishes.
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. Having a successor owner should allow for an easy transfer of ownership of the 529 account and the continuance of the saving strategy you established for your beneficiary.
As there can only one account owner, most married couples opt to have the spouse who is not the owner to be designated as the successor owner so the account management stays within the family.
Who can be a successor owner?
A successor owner must be at least 18 years old.
You should select someone whom you absolutely trust to follow your preferences on the use of the account. If the successor owner has to take control of the account, they will have the managerial powers and so can choose to switch the investment options in which the 529 is invested, request a withdrawal, and, if needed, change the beneficiary to a different member of the family of the preceding beneficiary, such as a sibling or a cousin.
How does a success owner administer a 529 account?
Account ownership will be transferred to the successor owner only when the submission of documentation of death or disability has been accepted by Ohio Tuition Trust Authority.
If you do not have a will and you do not elect a successor owner for your 529 account, a probate court may end up having to designate one.
If you have a will and you did not select a successor owner, or if your successor owner does not survive you, the 529 assets will pass to your beneficiary if he or she is 18 or older. If your beneficiary is younger than 18, the executor designated by your will or by operation of law will either elect to become the successor owner or will select another party to become the new 529 owner.
Since laws vary from state to state, you may wish to consult a probate lawyer to determine the precise effect of such a designation. You may revoke or change your successor owner at any time. If a situation arises that you need to adjust this designation, you can fill in the appropriate section of the Account Information Change Form.
While no one wants to consider this worst-case scenario, you’ll discover that having the successor owner framework in place can bring you peace of mind that your 529 account will be directed as you would wish. If you are already an account owner, log in to your Ohio 529 Plan to review your successor owner information and determine if you need to update. If you are ready to open an Ohio 529 account, make sure to fill out the section on successor owner.
Posted on September 12, 2019