California State Treasurer Fiona Ma thanked Governor Gavin Newsom for signing legislation that protects ScholarShare 529 college savings accounts from the enforcement of money judgments by creditors. The bill, SB 898, is authored by State Senator Bob Wieckowskiand sponsored by Ma, who chairs the Scholarshare Investment Board.
“Families enduring economic hardships should not have to worry about losing theirs or their children’s college dreams,” said Ma. “That’s why this bill is so important. It protects college savings at a time when the coronavirus pandemic has brought economic pain to millions of families.”
“Saving for your child’s college education is difficult enough under normal conditions, but with the economic collapse induced by the pandemic, it is especially tough for families today,” he said. “SB 898 gives families with ScholarShare 529 accounts the comfort of knowing that even if they must file for bankruptcy, their child’s college savings are shielded from creditors and their kids’ dreams will not be wiped out. We need more college graduates joining our workforce in the future and this bill will keep students on the path to higher education. I applaud the governor for signing this important bill.”
SB 898 adds ScholarShare 529 college savings plan accounts to the list of exemptions under California bankruptcy law, ensuring that college savings are protected from judgment claims by creditors. For the first and second year prior to the filing of the money judgment, the exemption amount will be set at a maximum gift tax limit of $15,000.
Currently, if an account holder is faced with a judgment, the creditor is allowed to attach the Scholarshare 529 account to satisfy their judgment, a result that can be devastating to the family and their loved ones. This is especially troublesome given any family or friend can put money in those accounts for the beneficiary – not just the person/family who files for bankruptcy. By comparison, retirement plans are protected from creditor claims.
“A ScholarShare 529 account can put students on the path toward a college degree by helping them pay for the skyrocketing costs of college,” said Ma. “Parents, grandparents, and other relatives of young people can help their student by opening an account and contributing today.”
Created in 1999, ScholarShare 529 accounts provide families with tax-deferred growth and withdrawals free from state and federal taxes when used for qualified higher education expenses such as tuition and fees, books, certain room and board costs, computer equipment and other required supplies.
ScholarShare 529, California’s college savings plan, is one of only four plans throughout the nation to receive a gold rating by Morningstar.