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Using a trust for a 529 plan

Many estate owners in Florida have 529 savings accounts that are used to put away money for the education of their children or grandchildren. Some may wonder if they should create a trust to hold such an account.

In most cases, this is not needed. If the creator wants the account to pass to the intended person and not got through probate, that intended person can be named as the beneficiary. The original creator of the 529 remains the owner.

One situation in which the creator might want to use a trust is to prevent the beneficiary from using the funds for something other than education. Another situation is if the creator wants the funds to pass to a second beneficiary should the first beneficiary not have educational pursuits. The trust that owns the 529 plan can have language specifying that this is how the account should be used.

Trusts can have a number of different functions within an estate plan. Some might think they are only for wealthy estate owners, but this isn’t true. For example, if there is a family member who has special needs and receives benefits from the government, that person might lose access to those benefits upon inheriting a large sum of money. However, the money could be placed in a trust to help the person with rent or other expenses without affecting those benefits. A trust could also be set up to protect money if an heir is likely to be irresponsible. Distributions could be tied to specific conditions, such as reaching a certain age. An attorney could help a client customize the terms of a trust.

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