Saving money for children’s college tuition and expenses is a common goal for many parents. This can be simple enough while the parents are married, but can be tricky if the couple is no longer together. However once a couple decides to divorce, new arrangements can be made in order to continue saving for children’s college education. These arrangements can be made as a part of the divorce settlement with no penalty or impact.
One method that divorced parents use to save money for children’s college education is through the use of a 529 account. A 529 account allows parents to deposit money into the savings and then use the funds for education purposes without having to pay federal income tax. However, when parents divorce, they may have to split the account and then determine what percentage of savings each parent will contribute to the account funds. This is something written into the divorce agreement and can be modified if need be.
Sometimes divorcing parents will freeze the 529 account before the child turns 18, which ensures the funds will only go to higher education purposes for their children. However, this also means that parents can no longer make any more deposits into the account. This is important because a divorce can be somewhat contentious and a parent may end up using the funds for something else which the funds are not intended for. The freezing capability eliminates this temptation.
A 529 account is just one of the various property division issues which need to be resolved when parents decide to file for divorce. Also, child custody, child support and alimony will need to be settled between the spouses or possibly through litigation in court. Whatever route is taken, it would be wise to have a thorough understanding of family law and what your options are regarding any assets, including your child’s college fund.