Include college savings in your estate planning

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With the costs of a college education skyrocketing, many parents are wisely opting to open 529 plans—tax-advantaged savings accounts specifically designed to promote saving for higher education on behalf of a beneficiary.

And like any other asset, including bank accounts and retirement portfolios, a 529 plan should be included in your estate planning.

A recent article published in U.S. News outlines the consequences of leaving your 529 plan out of estate planning.

A 529 plan allows the account holder to name a primary and a secondary successor. If the account holder dies or becomes incapacitated, the primary successor becomes the new account holder. As the account holder, the successor has the power to decide how the money is invested and how it can be used by the beneficiary. The successor can even change the beneficiary of the account.

Because the successor has complete control of the account, it is crucial that you name someone who has the beneficiary’s best interests at heart. You want this money to be used for the child’s education, so choose someone—whether it is the child’s parent or another person—who shares that goal.

If you don’t choose a successor, the beneficiary will become the account holder upon your death. This might not be want you want, particularly if the beneficiary is young. If the beneficiary is younger than age 18, the state may assign someone to make decisions about the account until the beneficiary becomes a legal adult. Or, if the beneficiary is young and somewhat irresponsible, he or she may be tempted to use the money for something other than education—thereby ruining your goal for the account and potentially incurring tax penalties as well.

Though most adults are now living to age 75, according to the Centers for Disease Control and Prevention, it never hurts to be prepared. Naming a successor and talking with an estate planning lawyer about your 529 plan can help ensure that the plan is used for precisely the purpose you intended: supporting a loved one’s education.

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About George Lovett

George H. Lovett is a founding partner of Lovett & Lovett. Mr. Lovett brings years of experience and insight to each case that he handles. A certified expert by the Ohio State Bar Association in Estate Planning, Trust and Probate Law, Mr. Lovett uses his extensive knowledge to compassionately and effectively help clients and their families work through legal matters in the areas of Wills and Trusts, Probate, Guardianship, and Medicaid and Nursing Home Planning.George Lovett's Google+ Profile

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