Author Topic: 529 For my child: who should be the "owner" - me, my wife, or both of us  (Read 1391 times)

Swat

  • 5 O'Clock Shadow
  • *
  • Posts: 49
Just setup a 529 for my newborn son. I've been starting to read more about asset protection lately and was wondering who should actually be the owner of the policy. Currently it is me since I'm the financially savvy one compared to my wife and I'm the one who took the steps to set it up. However, I'm the resident (soon to be attending) and my wife does not have the earning potential...and with it, possible lawsuits.

1) Should I still be the owner of the 529 or should it be switched to my wife since if there was a lawsuit it will likely be against me (although she is also in medicine as a midlevel).

2) Can you even have joint owners of a 529? Would this make sense and decrease my chance of future liability if the lawsuit doesn't name both of us?

3) I know retirement assets (401k, IRA) generally have some protection in lawsuits, but what about 529 as a whole? How do courts typically handle 529 accounts in lawsuit cases?

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4914
  • Age: 34
  • Location: Seattle, WA
    • My blog
Re: 529 For my child: who should be the "owner" - me, my wife, or both of us
« Reply #1 on: January 22, 2017, 10:45:18 AM »
Please buy professional liability insurance, in a high enough value to make this question moot. It's not prudent to risk bankruptcy on this. Even if your retirement accounts and college savings would be protected (not sure about the college savings), the results would still be pretty disastrous.

sol

  • Walrus Stache
  • *******
  • Posts: 8492
  • Age: 42
  • Location: Pacific Northwest
Re: 529 For my child: who should be the "owner" - me, my wife, or both of us
« Reply #2 on: January 22, 2017, 10:51:07 AM »
The protections afforded to 529 plans vary by state, since they are state-run plans.  Look yourself up here:  http://cfed.org/assets/documents/seed/529plans.pdf

It looks like that in every state, your 529 contributions are shielded once they are two years old and don't exceed the contribution limits.

My wife and I are both listed on our 529 account, like on all of our accounts, to ease the transition in case one of us dies.  I've seen too many people struggle through reclaiming their accounts as designated beneficiaries, when they could have just been full account holders in the first place.  As long as you and your partner are on the same page, I don't see much down side here in co-ownership.
« Last Edit: January 22, 2017, 11:00:05 AM by sol »

daymare

  • Bristles
  • ***
  • Posts: 463
  • Age: 30
Re: 529 For my child: who should be the "owner" - me, my wife, or both of us
« Reply #3 on: January 22, 2017, 12:52:23 PM »
Most 529 plans only allow one owner of a 529 account.  If that's the case for the plan you're considering, you can have one of you as account owner and the other as contingent owner, should something happen to the other.

Laura33

  • Handlebar Stache
  • *****
  • Posts: 2275
  • Location: Mid-Atlantic
Re: 529 For my child: who should be the "owner" - me, my wife, or both of us
« Reply #4 on: January 22, 2017, 03:38:58 PM »
Not related to the liability question, but if you are using the 529 in part for the state tax deduction, you may be able to get a larger deduction with two accounts. Our state offers a $2,500 max deduction, so we opened a 529 for each kid in my husband's name and began contributing $2,500/yr to each. But we wanted to save more, so we also set up a separate Vanguard account that we mentally designated as college savings and put another $5-6K/yr there.  Then we realized that the deduction is $2,500 per account, not a per-child max (i.e., each parent can open a separate account for each kid, and you can deduct $2,500 for each, or $10K for us).  So we opened another account for each kid in my name and started adding $2,500/yr to those (in lieu of the Vanguard).  So now we are saving the same amount for college, but paying $450 less on our state taxes.