Monday, February 6, 2023
HomeBankruptcy529 ScholarShare Accounts Protected From Parental Collectors

529 ScholarShare Accounts Protected From Parental Collectors

college saving exemption

A considerable new California exemption snuck into regulation in 2021. It protects 529 faculty financial savings accounts from the collectors of oldsters. The exemption applies in all California collections and to California bankruptcies when the CCP 704 exemptions are chosen.

The eyeopener is {that a} mum or dad (or different donor) can contribute the quantity of the federal reward tax exclusion annually to an account for every little one. That’s at present $16,000 a yr.

For a present consumer, which means he can convert his non exempt brokerage account to a school account of $16,000 for every of three youngsters. The cash grows tax free for the children’ training, protected from their dad and mom’ monetary difficulties

This exemption covers completely Golden State ScholarShare accounts, ruled by the Schooling Code, starting at 69980 .

The exemption is discovered at CCP 704.105.

Contrasting chapter provisions

The Chapter Code has a like-minded provision in 541(b)(6) that excludes 529 accounts from the chapter property, however limits the exclusion to funds deposited greater than a yr earlier than any chapter submitting. Contributions within the yr earlier than the yr of submitting are additional restricted to $7575, as of 2022. That quantity is adjusted each three years for inflation.

Against this to the exemption for Golden State ScholarShare accounts, the chapter exclusion is offered to filers dwelling wherever.

529 has double advantages

Saving for faculty is an apparent good, simply as clearly as pupil loans can blight a pupil’s life. Like retirement financial savings accounts, the cash grows tax free. So even dad and mom who don’t face monetary dangers profit.

However the standout for me, as a chapter lawyer, is that ScholarShare accounts insulate faculty financial savings from the dangers of being in enterprise. Even when the dad and mom’ monetary life takes a nose-dive, the children nonetheless have assets for increased training.


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