For years, you have prioritized your children’s future, from saving and planning to devotedly investing in their education. Now, with divorce in the mix, you may be concerned about how this transition could impact their best start in life.
There is a common assumption that money earmarked for college is untouchable. In divorce, “earmarked” funds do not always mean they are “exempt.”
Different rules for different savings vehicles
Many families use 529 plans or Coverdell Education Savings Accounts. Both tools offer tax advantages when saving for college.
529 plans typically belong to the account owner, not the beneficiary, which means the parent who opened the account usually keeps control of it. Coverdell Education Savings Accounts follow similar principles.
UTMA and UGMA accounts present a different situation. These accounts legally belong to the child, so divorce cannot directly affect the funds.
How courts handle education savings
Divorce proceedings address all marital assets, and education savings accounts are no exception. These accounts, such as 529 plans or Coverdell ESAs, may be subject to division like other property.
The court will consider who contributed to the account and when the contributions were made. A judge will decide how to divide these assets equitably between the spouses.
Suppose one parent primarily funded the 529 plan. In that case, the court might still allocate a portion to the other parent, especially if those funds were contributed during the marriage.
Your children’s welfare remains a priority
In any divorce, Pennsylvania courts put the child’s best interests first. Judges are especially mindful of preserving important opportunities, such as education, that parents have already planned and funded.
Typically, child support covers a child’s basic needs until they turn 18 or graduate from high school. It does not, however, extend to college expenses. Still, parents can choose to address college costs in their divorce settlement.
In Pennsylvania, parents usually are not required to pay for a child’s college. But if they include college costs in a marital settlement agreement, it becomes enforceable. That agreement sets out each parent’s financial responsibilities for the child’s higher education.
Protecting what matters most
Your divorce will eventually be finalized, but your role as a parent committed to your children’s success continues beyond it. Safeguarding education savings during this transition demonstrates that commitment in tangible ways.
Take the time to understand your options and seek appropriate counsel. Remember, the decisions you make today will shape your children’s opportunities tomorrow.