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How to handle college savings during property division

Many Florida families have taken steps to ensure that their children will be able to afford a quality college education. One of the most popular savings options for funding higher education is a 529 account. When a couple is facing divorce and property division, however, a 529 plan becomes just another asset that should be included in negotiations.

In most cases, the parent who will retain primary custody will also become the "owner" of that child's 529 account. The presumption is that the custodial parent will be the one handling the majority of tasks associated with sending the child off to school, and should therefore have the ability to direct the accumulated funds from the 529 account to cover the cost of an education. However, there are cases in which those plans do not ultimately come to fruition.

An example is found in the case of a custodial parent who later remarries an individual who has children, or who has additional children with a new partner. In such cases, it is possible for the parent to alter the beneficiary of the 529 account, and to use funds that were set aside for one child to cover the education costs of another. The same flexibility that makes these plans so attractive can also make them difficult to manage during and after a divorce.

There are a number of ways that divorcing parents can ensure that money that has been set aside as college savings is ultimately put to that use, and for the intended child. One option is to divide the assets held in a 529 plan into two separate accounts, which gives both parents a measure of control over the savings held within those accounts. Another approach is to liquidate the 529 account and establish an education trust. The right choice will differ from one family to the next, but all Florida parents who put money into 501 plans should include a discussion of the matter within the property division process.

Source: Forbes, "How To Protect Your College Savings During A Divorce", Brian Boswell, Aug. 28, 2016

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