Is My Child’s College Fund Included in Property Division?

Protecting Your Child's College Fund in a Divorce

When going through a divorce, there is a lot to consider, especially when it comes to the division of property and assets. So much so that it can be easy to forget about accounts created specifically for your child or children. However, understanding how your child’s college fund is viewed during your settlement is an important first step in ensuring this account is protected.

What Is a 529 Plan?

The most common type of education account is a 529 plan. Named after Section 529 of the Internal Revenue Code, this plan is designed specifically for the expenses of higher education and comes in two forms: Prepaid and savings. Many people choose a 529 because it offers benefits when compared to other savings accounts, namely that it is an opportunity for tax-free earnings. There are also a multitude of education-related expenses that qualify, not just tuition—including fees, books, equipment, and room and board.

Typically, these plans have a single account owner, either you or your ex. So, while the beneficiary is your child, a 529 plan is considered an asset of the account owner.

This means that it is possible for the account owner to:

  • Change the beneficiary
  • Use the plan to pay off their own student loans
  • Take a non-qualified distribution to pay for something other than your child’s education
  • Combine the account with another 529 plan
  • Use the account’s funds to pay for private high school instead of college funds or vice versa

How to Protect Your Child’s 529 Plan During a Divorce

To ensure that none of the above possibilities occur, you will need to be communicative to your divorce attorney about your 529 plans. Your attorney can address the account in your divorce settlement, laying our terms such as:

  • Whether or not both parents have equal say in the utilization of the account, even if it is still owned by a single party.
  • An inability to change the beneficiary without approval
  • The protection of future contributions
  • Clearly laying out what educational expenses qualify
  • What to do with leftover funds
  • How to divvy up the plan if your child decides not to go to college

Setting clear expectations about the handling of your child’s 529 plan in writing, in either the Marital Settlement Agreement or in the Final Judgment of Dissolution of Marriage is the only way to rest easy about the safety of this account. If you and your ex have utilized another form of savings account for your child, you should also consult your attorney. It might also be helpful to hire a financial planner that has experience in divorce. They can advise you on both how to protect your assets during the divorce process as well as afterwards.

At Conti Moore Law, PLLC, we understand that no divorce is easy, especially when children are involved. So, we do our best to help you navigate the process successfully. We are backed by over 15 years of experience in both divorce and asset division. Our family law attorneys are adept at handling all of the details involved in asset division, so whether you are at the negotiation table or in court, we can help you keep your child’s education fund protected.

Reach out to our law offices today at (407) 315-2006 or fill out our online contact form to schedule a free consultation with one of our family law attorneys.

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