[WSBAPT] Is a 529 Account considered a probate asset if the account custodian dies and no successor custodian is named?

[Lewis, Amy C.]

Michael,

              I recently had this issue in an estate, for the first time since 529 accounts were created.  My client named her son as successor account manager, but he died before my client.  My client had a revocable living trust that held all of her other assets.  The financial institution where the 529 accounts were held required us to open probate to designate a successor manager for these accounts.  In my case the total value of the two 529 accounts was in excess of $100,000, so we did not explore whether a small estate affidavit was an option.  For estate tax purposes, we did not include the 529 accounts as part of the decedent's taxable estate.

              I don't believe that 529 accounts are custodial accounts governed by the UTMA.


Amy Lewis, Attorney
Pronouns she/her/hers
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909 A Street, Suite 600 | Tacoma, WA 98402
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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of msafren at jennylinglaw.com
Sent: Monday, August 28, 2023 10:00 AM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Is a 529 Account considered a probate asset if the account custodian dies and no successor custodian is named?

Hello Colleagues,

I"ve got an interesting situation that I'm trying my best to address.   I'm not sure if a 529 account where the named custodian or owner dies, but hasn't named a successor custodian or owner is a considered a probate assets or not.

I understand that under federal law, a 529 account is considered a completed gift by the donor to the beneficiary.  Here, the grandparents made the contributions into a 529 account and named the decedent the custodian or owner of the account, however the grandchildren are the beneficiaries of the 529 account.

I'm therefore unclear is this is considered a probate asset of the decedent's or if this is instead a custodial account and not an asset of the estate since the gift to the minor beneficiaries has already been considered a complete transfer.

Any insight or guidance would be greatly appreciated.

Thanks!


Kind regards,

Michael S. Safren, Esq.
Attorney at Law

14900 Interurban Ave. S., Ste. 280 | Seattle, WA 98168
11900 NE 1st St., Bldg. G - Ste. 300 |  Bellevue, WA 98005
P: (206) 859-5098 | E: msafren at jennylinglaw.com<mailto:msafren at jennylinglaw.com>
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