Individuals going through marital dissolution in Illinois may naturally focus on how they will divide monetary assets and address the family home. However, one question that many people never consider before getting a divorce is what will happen to college savings accounts. These include 529 assets that have been accumulated for the benefit of one's children.
One concern that a divorcing individual may have is that his or her ex in the future could change a 529 account's beneficiary from the child for which the funds were originally intended to himself or herself, for his or her own college expenses. The person could also decide to withdraw the assets for a child he or she has with a future spouse. It is for this reason that it is necessary to spell out in a separation agreement that the 529 savings plan's funds should be used only for the beneficiary named.
Other various options are available for addressing a child's savings during a divorce proceeding. For instance, a person could establish a trust or divide 529 assets into two separate accounts within a single program. An existing 529 plan could also be modified to a custodial account.
The tricky part of dealing with issues related to asset and property distribution is trying to figure out a mutually beneficial outcome for both parties to avoid further court intrusion. It is also important to consider the tax implications of any financial decision made. Appropriate legal guidance may help Illinois individuals going through divorce to explore all of their options when it comes to dividing college savings plans and other potentially high-value assets during the proceedings.
Source: Forbes, "How To Protect Your College Savings During A Divorce", Brian Boswell, Aug. 28, 2016