Choosing & Protecting Your Child’s College Savings Account During & After Divorce
Choosing & Protecting Your Child’s College Savings Account During & After Divorce Oct 16, 2020 As family law attorneys who practice here in Florida, an increasingly common issue that we deal with when it comes to divorcing spouses is addressing custodial and 529 accounts. Even when a divorce is amicable, problems can still arise with respect to budgeting for a shared child’s college plans. 529 accounts allow people to save and invest for college, while avoiding taxes. The funds, when withdrawn, are also exempt from federal taxation, as long as they are spent on “eligible” education expenses (tuition, books, housing, meal plans, computers, etc.). Still, if not properly addressed in the separation agreement, some of them are subject to a number of changes that you may be opposed to. While the general rule is that the custodial parent becomes the owner of the 529 account, with more and more courts encouraging equal, shared parental responsibility (unless they find that it is detrimental to the child), the management of the college savings account must be explicitly addressed in the separation agreement; the contract that outlines how everything is divided. In particular, it is very important for spouses to know that, legally, these funds belong to the child as the beneficiary, and are not available to a spouse to withdraw and use as their own. Below, we discuss some of the details associated with each type of account that is relevant to college savings during divorce, and how to protect them: 529 Plans 529 plans provide a certain amount of flexibility such that one spouse could try to change the beneficiary of record and withdraw the assets to pay for their own or someone else’s education expenses, or simply revoke the account. This is why it is crucial that the separation agreement specify that the funds are only to be used for your child (i.e. and include specific identifying information for that child). Coverdell Education Savings Accounts (ESAs) Note that Coverdell Education Savings Accounts (ESAs) operate in almost the exact same way as 529 plans, however, they must be paid out to the named beneficiary within 30 days of the beneficiary turning 30, which can result in penalties and tax consequences. In addition, they are transferred upon divorce, and the subsequent owner treats the account as though they were the original owner. Custodial 529 & UGMA/UTMA Accounts The best way to ensure that an education account is only used for one particular person is a Custodial 529 and/or UGMA/UTMA account, as the beneficiary on these accounts cannot be changed. However, note that the beneficiary can only take ownership of the account once they reach the age of majority (age 18 in Florida). Other Funds That Might Be Used for College Savings Other funds affected by divorce (i.e. subject to division) that also need to be addressed in the agreement include: Roth & Traditional IRAs (the portion accrued during the marriage) Qualifying US Savings Bonds (note that these can be sent back to the Treasury with instructions to split and reissue upon divorce) Qualified withdrawals: an attorney is going to need to assist the student if they, for example, need to withdraw funds to help pay for rent associated with living with a parent, or if that parent has to withdraw funds to help pay for costs if the beneficiary becomes disabled, etc. Successor owners: you will also need to specify a successor in the event of the beneficiary’s death, as anyone who receives the account via probate can change the beneficiary Statements: note that even if you are not a joint account owner, you can be listed as an interested party on the account so that you always receive statements and know what is going on If You Have Any Worries or Concerns Regarding Your Child’s College Savings in Your Divorce, Contact Our Florida Divorce & Family Law Attorneys Today Family matters can become potentially volatile when it comes to dealing with property division, especially when there are concerns over the well-being of a child’s future. Contact our experienced Tampa family attorneys at HD Law Partners today to help ensure that you and your loved ones are protected throughout this process. Resource: nytimes.com/2020/09/04/your-money/college-savings-529.html Dealing with The Family Home During Divorce Posted in Divorce | No Comments » Connect with us Archives May 2026 April 2026 March 2026 February 2026 January 2026 December 2025 November 2025 October 2025 September 2025 July 2025 June 2025 January 2025 January 2024 December 2023 November 2023 October 2023 September 2023 August 2023 July 2023 June 2023 May 2023 April 2023 March 2023 February 2023 January 2023 December 2022 November 2022 October 2022 September 2022 August 2022 July 2022 May 2022 April 2022 March 2022 November 2021 October 2021 September 2021 August 2021 July 2021 May 2021 April 2021 March 2021 February 2021 January 2021 December 2020 November 2020 October 2020 August 2020 July 2020 June 2020 May 2020 April 2020 March 2020 February 2020 January 2020 December 2019 November 2019 October 2019 September 2019 August 2019 July 2019 June 2019 May 2019 April 2019 March 2019 February 2019 January 2019 December 2018 November 2018 October 2018 September 2018 August 2018 July 2018 June 2018 May 2018 April 2018 March 2018 February 2018 January 2018 December 2017 November 2017 October 2017 September 2017 August 2017 July 2017 June 2017 May 2017 April 2017 March 2017 February 2017 January 2017 December 2016 November 2016 October 2016 November 13 Categories Alimony Appellate Arbitration Auto Accidents Auto Insurance Business Corporate Business Insurance Law Child Custody Child Support Criminal Law Divorce Family Law FEMA Insurance Payments Florida’s Mandatory 2‑Hour Legal Professionalism CLE: Foreclosure Defense Fort Myers Hurricane Insurance Attorney General Guardianship HD Law Partners Service HOA/Property Management Homeowners Association Homeowners Insurance Hurricane Claims Hurricane Insurance Insurance Bad Faith Insurance Claims Insurance Defense Insurance Litigation Landlord Tenant Law Enforcement Liability Loan Modifications Mold Water Damage Parental Rights Paternity Personal Injury Premises Liability Law Prenuptial Agreements Private Security Property Distribution Property Owner Law Sarasota Insurance Litigation Attorney Slip Fall Tampa Business and Corporate Attorneys tampa family attorney Tampa Insurance Attorneys Timeshare Timesharing Uncategorized HD Law Partners is proud to be your trusted full-service law firm Quick Links Property & Casualty Business & Corporate Litigation Family Law Contact Us Careers Get In Touch 2002 North Lois Avenue Suite 510 Tampa, FL 33607 813-253-5333 Contact Us