The end of marriage is fraught with crucial decisions for both sides which impact not only the parties involved, but also any children from the marriage. Some families try to save for college by putting money aside in a 529 plan which is a tax-advantaged account used for higher education. However, during and after a divorce a family that has invested in a 529 plan should decide and communicate with each other on what to do with it, how to manage it and how much money to put in post-divorce.
Michigan residents will find it helpful to learn that the future of their children's education can be protected if the divorcing couples communicate with each other and include how a 529 plan should be handled in their divorce settlement. In order to make an informed decision, it is important to consult with a family law attorney on the nuances of college saving plans.
Some options include freezing the plan, meaning that neither parent makes any more deposits. Existing money in the account would go towards the designated child's education. Freezing the account also prevents parents from withdrawing money from this account for another expense or purpose.
Once an account is frozen, the parties can still decide on how to invest the money and whether to adopt a risky stock based strategy or a more conservative money market strategy. If a judge decides to split the account, then one parent would control how the money should be invested on their half of the plan and vice versa. A court can also order what percentage of the education cost should be paid by each parent.
However, education cost will vary depending on the child's choice of school, interest and high school grades. Nevertheless, it is important for divorcing couples with children to seriously consider their options about what to do with their child's 529 plan during and after the divorce.
Source: US News, "Discuss College Saving During Divorce Process," Reyna Gobel, April 29, 2013