Divorce is one of the most emotionally difficult events in a person’s life. It can also be one of the most financially stressful. There are countless details to settle, and if the end of your relationship is like most, communication problems only make things tougher to handle.
When it comes to money matters, Georgia’s divorcing parents have it especially tough. In addition to determining child support and paying for their children’s everyday needs, they need to have a solid plan for future expenses that arise long after the divorce. The biggest of these is usually college tuition.
Parents who contributed to an established college fund before their divorce can take comfort in the fact that the end of their marriage doesn’t have to spell the end of their children’s higher education plans. The most common fund is the 529, an investment account from which money can be drawn tax-free, provided it goes toward education expenses.
After a divorce, a couple has several options regarding a 529. One is to have the account frozen, which means they can’t put more money into it, but neither parent can withdraw from it, either. It can be only used by the child for education costs. This means that neither spouse need fear their ex will take the money and run with it (which would still require the withdrawer to pay hefty tax penalties).
Another option is to have a judge divide the account in two at the time of the divorce. This allows both parents to continue contributing to their child’s education, preferably after an honest discussion about how much each parent will deposit on a regular basis.
On the rare chance that there’s any money left in the 529 account once the student has finished school, parents should discuss how to split up those funds. They could be used for another child in the family or even on one of the parents to continue their education.
Whether your child is a toddler or in high school, it’s important for you and your soon-to-be ex to include college savings accounts in your divorce proceedings. Remember that no matter how you feel about your former spouse, you both want the very best future for your child. A college education is something that will long outlast your arguments over money in the divorce process.
Source: U.S. News & World Report,”Discuss College Savings During Divorce Process,” Reyna Gobel, April 29, 2013