Many parents jointly open 529 plans to save for approaching college expenses for their kids. When parents divorce, there are many issues to consider when dividing property, the 529 savings account among them.
As part of a divorce settlement, one parent will typically assume individual control over the account as opposed to freezing or splitting the account. That parent will be considered the sole owner and decision maker with regard to the funds contained in the account.
Deciding who will maintain control over the account boils down to your child’s eligibility for financial aid. Less money and assets could translate into more financial aid. Since the non-custodial parent’s assets and income are not included on the FAFSA (Free Application for Federal Student Aid), there would be a benefit in handing over control of the 529 to him or her.
To maintain some oversight, the parent who declines ownership can be designated as an authorized user on the account. They will not be able to control the funds movement, but they will be able to keep tabs on what is going on. Additionally, that parent should be named as the successor to the account should the owner die.
If you are considering divorce and have questions regarding property division, contact the Law Offices of Ronald L. Bell for help. Ron has been successfully practicing family law for over 30 years in Lake County Illinois and surrounding areas.
Source: U.S. News, “3 Important College Funding Questions to Answer During a Divorce”, accessed August 19, 2015.