164A.350 Ownership of contributions and interest -- Cancellation of participation
603 words·~3 min read·
/ky/164a-350A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
agreement -- Transfer of ownership rights -- Penalty on earnings refunded due
to cancellation or nondistribution -- Exemption from creditor's execution. For all purposes of Kentucky law, the following shall be applicable:
(1)The trust shall exercise ownership of all contributions made under any participation
agreement and all interest derived from the investment of the contributions made by
the participant up to the date of utilization for payment of educational costs for the
beneficiary. All contributions made under any participant agreement and interest
derived from the investment of the contributions made by the participant shall be
deemed to be held in trust for the benefit of the beneficiary;
(2)Any participant may cancel a participation agreement at any time, and terminate the
trust's ownership rights thereby created in whole or in part, by delivering an
instrument in writing signed and delivered to the program administrator or his
designee. In the event the participation agreement is terminated in part, the trust
shall retain ownership of all contributions made under the participation agreement
not previously expended for the qualified educational expenses of the beneficiary
and not returned to the participant. The participant shall retain a reversionary right
to receive upon termination the actual market value of the participant's account at
the time of the cancellation, including interest, except that the participant may be
required to pay a penalty upon the interest that has been credited to the participant's
account in accordance with subsection
(6)of this section;
(3)The educational institution shall obtain ownership of the distributions made from
the participant's account for the qualified educational expenses paid to the
institution at the time each payment is made to the institution;
(4)Any amounts received by the trust pursuant to the Kentucky Educational Savings
Plan Trust which are not listed in this section shall be owned by the trust;
(5)A participant may transfer the participant's rights to another eligible participant,
including, but not limited to, a gift of the participant's rights to a minor beneficiary
pursuant to KRS Chapter 385, except that, notwithstanding KRS 385.202(1), the
transfer shall be effected and the property distributed in accordance with
administrative regulations promulgated by the board or the terms of the
participation agreement;
(6)Notwithstanding any other law to the contrary, if any earnings on contributions are
refunded due to cancellation of the participation agreement by the participant or
nondistribution of the funds for payment of the beneficiary's qualified educational
expenses, the board may charge a penalty to the participant against the earnings on
contributions. No penalty shall be charged when a refund is made due to:
(a)The death, permanent disability, or mental incapacity of the beneficiary; or
(b)The beneficiary's receipt of a scholarship, an educational assistance allowance
under Chapters 30, 31, 32, 34, or 35 of Title 38, United States Code, or a
payment exempt from income taxation by any law of the United States, other
than a gift, bequest, devise, or inheritance within the meaning of Section
102(a) of the Internal Revenue Code, 26 U.S.C. sec. 102(a), for educational
expenses, or attributable to attendance at an institution of higher education, to
the extent that the amount refunded does not exceed the amount of the
scholarship, allowance, or payment; and
(7)Notwithstanding any other provision of law to the contrary, contributions and
earnings on contributions held by the trust shall be exempt from levy of execution,
attachment, garnishment, distress for rent, or fee bill by a creditor of the participant
or the beneficiary. No interest of the participant or beneficiary in the trust shall be
pledged or otherwise encumbered as security for a debt.