California Education Code 69986 – For all purposes of California law, all of the following …
For all purposes of California law, all of the following apply:
(a) The participant shall retain ownership of all contributions made under any participation agreement up to the date of utilization for payment of higher education costs for the beneficiary, and all interest derived from the investment of the payments made by the participant shall be deemed to be held in Scholarshare trust for the benefit of the beneficiary. Neither the contributions, nor any interest derived therefrom, may be pledged as collateral for any loan.
Terms Used In California Education Code 69986
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Board: means the Scholarshare Investment Board established pursuant to subparagraph (B) of paragraph (2) of subdivision (a) of Section 69984. See California Education Code 69980
- Fraud: Intentional deception resulting in injury to another.
- Gift: A voluntary transfer or conveyance of property without consideration, or for less than full and adequate consideration based on fair market value.
- Participant: means an individual, trust, estate, partnership, association, company or corporation, a custodian under the California Uniform Transfers to Minors Act (Part 9 (commencing with Section 3900) of Division 4 of . See California Education Code 69980
- Participation agreement: means an agreement between a participant and the Scholarshare trust, pursuant to this article. See California Education Code 69980
- Probate: Proving a will
- Qualified higher education expenses: means the expenses of attendance at an institution of higher education as provided in paragraph (3) of subsection (e), expenses associated with participation in a registered apprenticeship program as provided in paragraph (8) of subsection (c), and payment on the principal or interest of a qualified education loan as provided in paragraph (9) of subsection (c), of Section 529 of the Internal Revenue Code of 1986, as it is amended from time to time, if, as determined by the board, the amendment is consistent with the purposes of this article, and as determined and certified by the institution of higher education in the same manner as prescribed in Title IV of the Higher Education Act of 1965 (20 U. See California Education Code 69980
- Scholarshare trust: means the trust created pursuant to this article. See California Education Code 69980
(b) If the participation agreement is canceled prior to payment of higher education expenses for the beneficiary, the participant shall retain ownership of all contributions made under the participation agreement and reversionary right to receive interest on all the contributions at the rate of interest at which the contributions were invested.
(c) Notwithstanding subdivision (b), if there has been a decrease in the value of the funds in a participant’s account at the time of cancellation of the participation agreement, the participant shall not have ownership rights to any amount above the market value of the funds in the account at the time of cancellation.
(d) The board shall develop adequate measures to prevent contributions on behalf of a designated beneficiary in excess of the maximum contribution limits provided for in this article.
(e) If the beneficiary graduates from an institution of higher education and has no intention of further attendance at an institution of higher education, and a balance remains in the participant’s account, then the Scholarshare trust shall pay the balance to the participant.
(f) The board shall develop a method to make payment of qualified higher education expenses directly to higher education institutions or to other third parties for the benefit of designated beneficiaries and to control for fraud under any direct reimbursement method of payment that it may adopt. The institution of higher education or another third party shall obtain ownership of the payments made for the higher education expenses paid to the institution or to that third party at the time each payment is made to the institution or to that third party.
(g) The board may also develop a method to make payment of qualified higher education expenses directly to beneficiaries in a manner that is consistent with applicable federal requirements and restrictions.
(h) Any amounts paid pursuant to the Scholarshare trust that are not listed in this section shall be owned by the Scholarshare trust.
(i) A participant may transfer ownership rights to another eligible participant, including, but not necessarily limited to, a gift of the ownership rights to an eligible minor beneficiary pursuant to this article. The transfer shall be effected and the property distributed in accordance with administrative regulations adopted by the board or the terms of the participation agreement.
(j) Custodians for a minor under the California Uniform Transfers to Minors Act (Part 9 (commencing with Section 3900) of Division 4 of the Probate Code) or similar provisions adopted by another state may enter into participation agreements in accordance with regulations adopted by the board.
(Amended by Stats. 2019, Ch. 17, Sec. 2. (AB 853) Effective January 1, 2020.)