Section 69986.
Cal. Education Code - EDC § 69986.
in effectFor 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.
(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.
References
referencesCal. Probate Code - PROB § 3900.
Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026