Many parents in Texas and across the nation understand that they need to begin saving early for their child's college education. However, they might forget to set up a contingency plan to handle the funds in the event that they die. Part of estate planning includes preparing for the unexpected. If a parent has a federal education savings plan, such as a 529, they should name someone to replace them if they die unless they want to run the risk of having someone randomly put in charge of their child's future.
Even if parents do plan for a successor, that person still might not manage the fund the way the parents expected. Parents can help avoid this by making their wishes clear. The account will ask the owner to list both a primary and secondary successor. The primary successor takes over responsibility and control of the account if the owner dies. They make investment decisions and can determine how the money is eventually spent. Most importantly, they can choose a different beneficiary. If a successor is not designated and the account holder passes away, the beneficiary will take over the 529 plan. However, if the beneficiary is a minor, the state could decide who should manage the account.
Choosing a successor is an important decision that involves trusting someone enough to manage the funds. Often, a family member or long-time family friend can fill that role. A grandparent or trust fund is another option to help ensure that the account is managed properly. The important thing is to select someone who has the same goals in mind for the child and their future scholastic endeavors.
Parents often need to consider a number of factors when planning for the needs of children in the event of their untimely death. An estate planning attorney might be able to help clients designate an appropriate successor for a 529 plan.
Source: US News and World Report, "Make College Savings Accounts Part of Estate Planning", Reyna Gobel, May 31, 2013