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Help protect your kids' college funds with proper estate planning

Many parents in Hudson County help their children save for their future education by starting a college savings plan. However, some of them may overlook the importance of protecting that money. One of the best ways a person can ensure that those funds will be used the way they were intended is to include them in his or her estate planning.

One college-saving and tax-avoiding options is a 529 plan, which allows a person to accumulate and withdraw money that is federally tax-free when a person puts it to use for education-related expenses. However, it is very important to name the right successors in the event that the parent should pass away or become unable to make decisions. Both the primary and secondary successors should be trusted to distribute the funds how the plan owner truly desires. As part of one’s state planning, a person can even have the executor of his or her will distribute those savings funds.

Many problems can occur if a parent fails to name a successor. For example, if a parent should die the beneficiary becomes the owner of the account. That means he or she could use the funds improperly. It’s also possible that if the beneficiary is under 18 the state could step in and choose someone else to be in charge of the funds. That’s why making a child’s college savings account a part of one’s estate planning is good idea.

While everyone hopes to live to retirement age, fatal accidents can happen at any time. Knowing and understanding all the aspects of estate planning and how to make one’s college savings a part of that plan can help protect a child’s future. Speaking with an experienced estate-planning attorney could also be very helpful.

Source: Source: U.S. News & World Report, “Make college savings accounts part of estate planning,” Reyna Gobel, May 31, 2013.

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Kearny, NJ 07032-3010
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