Should grandparent or parent set up the 529 account
I would be happy to gift $$$ into a 529 account for our granddaughter and have her mother manage it and deal with any tax implications. However, would that impact her eligibility for financial aid? Also, as I may well not live until she begins college, wouldn’t it be easier if it was managed by her mom?
Terry Says
You can open an account in either name, and a child can be the beneficiary of multiple 529 accounts. One reason you might want to open the account is to get a state income tax deduction if your state provides that.
Your question about death of hte owner is an interesting one. If the account owner dies before the money is used, each state has its own procedures for dealing with the assets. Some states allow the grantor to name “successor owners.” If your state is one of those, the process is simple.
If no successor owner is specified, in some cases the surviving spouse will become the successor owner. In some cases the beneficiary may become the account owner (more on that below). In some cases the executor of the estate can name a new account owner (including themselves) or request a refund on behalf of the estate. In other cases the new account owner will have to be decided through probate.
It is possible to name the beneficiary as the successor account owner. Some 529 plans require the successor owner to be at least 18 years old and a U.S. citizen or permanent resident. If the successor owner is under age 18, the account may be transferred to the beneficiary’s surviving parent, if any, or other legal guardian.
To transfer the account upon death of the account owner, a copy of the death certificate will be required.
