When you are going through a divorce, many issues must be resolved, including custody, support, and property division. One of the issues that you may need to settle in your divorce case is who will manage your child’s 529 plans and custodial accounts. Because your child’s education is important to you and your child, you want to ensure you take steps to protect the investment in a child’s college savings account during and after a divorce action. Our Illinois divorce attorney can help you address issues regarding 529 plans and custodial accounts to prevent your child’s college education savings from disappearing after a divorce.
Some of the issues that you need to discuss with your Illinois divorce attorney include:
Only one spouse can be named on the custodial account. Therefore, it is important to present a strong argument why you should be the parent that manages the account. A custodial 529 savings account must have the same beneficiary throughout the life of the plan. However, with a traditional 529 plan, the beneficiary may be changed. To prevent a step-child or new spouse from becoming the beneficiary, you want to be in control of the account during and after the divorce.
To ensure that the funds in your child’s college savings account are managed correctly and not diverted for other uses by your ex-spouse, you should insist that all details related to the accounts be included in your Marital Settlement Agreement (MSA), including under what circumstances a withdrawal may be made.
One of the problems with a 529 account or custodial account in a divorce is ensuring that the owner of the account uses the funds in the account for the child’s college education. In addition to including specific details in your MSA about the account, you can also include a clause that requires the parent named on the account to provide advance notice of any withdrawals from the account to the other parent. Even though you may not own the account, if your ex-spouse decides to misappropriate the funds in the account, advance notice may give you additional time to file a court action to prevent the use of the funds in violation of the terms of your MSA.
You want to provide details about investment strategies and options in your MSA. If you have more experience managing investments, you might use this as an argument why you should be named as the owner of the account. You may also propose that the parent who is not named as the owner should be consulted before the other parent makes any substantial changes in the investment options for the college savings account.
Receiving copies of statements from the financial institution that holds the 529 plan or custodial accounts is a way for you to verify that your ex-spouse is contributing to the account, investing the funds wisely, and does not make any unauthorized withdrawals. Include a clause in the MSA that requires your ex-spouse to place you on the account as a secondary recipient of monthly or quarterly statements.
Your MSA should stipulate that if your ex-spouse can no longer be the named owner of the college savings account that you should be named as the successor owner. You do not want another person to control the 529 plan or custodial account if your ex-spouse passes away, becomes incapacitated, or cannot be named as the owner for any other reason.
To ensure that your ex-spouse contributes to your child’s college education, clearly, define the terms for future funding of the 529 plan or custodial account. You also need to include details about how you and your ex-spouse will pay for educational and other expenses that are not covered by the college savings account. By including the details in your MSA, you reduce the risk of disputes and future litigation to resolve disputes.
When you are going through a divorce, it can be easy to forget some details, such as college savings accounts. Our Illinois divorce attorneys can help you remember these details to protect you and your children during and after the divorce. Contact our Illinois divorce lawyers today. By working with an experienced divorce attorney in Illinois, you reduce the chance that an important detail about your divorce will be overlooked and forgotten.
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