Ask Terry Questions College savings plan vs Mom’s care

College savings plan vs Mom’s care

By Terry Savage on August 29, 2019 | Wild Card

My 94 year old mother took out a $25,000 CD on March 6, 2014. The maturity date was March 6, 2019. She renewed the CD for another 5 years maturing March 6, 2024. It’s current value is $27,603.08. I am listed as “Tr” on the CD. My Mom’s intention is that the CD be divided between her 6 great-children, ranging in age 1 – 8 years old.
The CD currently earns 1.980%.
I would like to withdraw the money and place it in a 529 college fund, I would be the successor, if I were to die the parents would then be the successors. I believe throughout the years we and others can contribute to this fund for our grand-childrens’ future schooling. I understand there will be a penalty for early withdrawal.
Is this the best thing for me to do in order to follow my Mom’s wishes and to help the grand-children when they are of college age? Thank you

Terry Says

Well, a lot depends on how that CD is “titled”.  If you are trustee, as part of a designation made on a Revocable Living Trust, then you may have the right to break this CD and do things differently.  BUT, legally, even as a trustee under the trust,  you have an obligation to put your mother’s interests FIRST.  She is 94 now– but there are many centenarians. And even though she would want her grandchildren to have money for college, she may need the money for custodial care.  So you can’t “raid” her account to move it to a different place!!

Any elder-care attorney will tell you that.  And if you are with a good bank, they are always watching out for financial elder-abuse issues like a withdrawal from a CD!  So I suggest you let nature take its course and leave the money where it is — using it only as necessary for her care.  If there is anything left over, you can access it after her death.

Set up your own family 529 accounts and start saving from your OWN money now.  Only one account per family is needed, since children in the same family can share the assets in the account.

P.S. The interest rate on that CD looks very good in today’s interest rate environment — another reason to stick with it!

money

ASK TERRY

a personal
finance question