The costs of attending college rise more and more each year. Many parents help their children prepare for these costs by saving throughout their children’s lives, so that they have support after high school graduation.
When parents get divorced, they may be concerned that the costs of the divorce will affect their children’s futures. During a divorce case, is a college fund considered a marital asset? What happens if a spouse withdraws or spends money from a college savings fund?
Understanding College Accounts In Divorce
Usually, parents who are saving for a child’s college tuition will keep that money in a special account called an IRS §529 Qualified Tuition Program. These accounts are set up by one parent as the owner, with one child as the beneficiary. Most parents will agree that the funds in a 529 plan are for the child’s benefit and will not try to divide that money during a divorce. However, this is not always the case.
Contrary to popular belief, the child who is the beneficiary of the account does not own it and has no interest in the account until he or she attends college. When parents get divorced, the owner of the 529 plan may be able to access those funds without the other parent’s permission. Under IRS rules, the owner of the account has the ability to change the beneficiary, give money to someone other than the beneficiary, or simply withdraw the funds and close the account.
Because of this, money stored in an IRS 529 educational account (or in another type of savings account) is usually considered marital property and can be split between the spouses. Even if it is not split, couples who divorce may not feel comfortable contributing money to a savings account which only one of them controls.
Protecting College Funds
Parents who are concerned about a child’s educational account should enter into an agreement early in the divorce proceedings. The parents can ask the court to order that both parties are enjoined from taking funds from the account, and can ask that the college fund not be considered marital property. Alternatively, the parents could agree to move the money into a trust or other type of account which can only be accessed with the permission of the child or the other parent.
If the former spouse refuses to agree to conditions like these, it is a sign that the money in that account may be in jeopardy. Parents should try to monitor the account’s monthly or quarterly statements to make sure that the funds are not being withdrawn by the account holder. If they are, the parent can ask the court to enter an order mandating that the other spouse will replace the funds using money from the divorce settlement or order.
Help For Parents
With proper planning, money set aside for a child’s college tuition can be protected during a divorce case. Whether it is with an agreement between the parties or through a court order, an experienced family law attorney can take steps to make sure that money is available in the future.
At Ashby Law, we know how important your child’s education is to you, and we can help you work out an arrangement that fits everyone’s needs. Our divorce attorneys will work with your former spouse on your behalf, and create a resolution that protects your children’s financial future.
For help with your situation, contact us today by calling 509-572-3700.