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Addressing 529 College Savings Accounts for Your Child in Divorce


Just as arguing over assets is one aspect of some divorces. The treatment of 529 and custodial college savings accounts is an increasingly common issue for some divorcing parents, and therefore for family law attorneys as well. What will happen to the account, who will manage it, how it should be addressed in the marital settlement agreement, etc. — all of these are crucial issues that parents must tackle if they’ve set up such an account for their child.  Below, we discuss some of most important facts to be aware of when it comes to 529 college savings accounts and suggestions on how to address your 529 account if you are going through divorce:

Whoever Established the Account Is the Owner

The general rule is that whomever set up the account is technically the account owner unless they transfer ownership of the account. This is the case even though the account was set up as a gift to the beneficiary.

The Account Owner Can Drain the Account or Gift It to Someone Else at Any Point

In addition, in sharp contrast to accounts established for children under the Uniform Gift to Minors Act (or, in Florida, the Uniform Transfers to Minors Act), the account owner is not only able to withdraw funds from the account to use however they like, but they are also free to switch the account beneficiary to someone else at any time (for example, to another child from a subsequent marriage).

Options to Address 529 Accounts in Divorce

As a result, in some circumstances, it behooves the other parent to ensure that, if marital funds were used to establish the 529 account, the funds in the account are treated as marital assets and distributed equitably, and if not, that perhaps they address how the account is treated in their marital settlement negotiations. One option is for both parents to agree to divide the account and transfer partial ownership so that each parent is an account owner.

Make Sure Your Marital Settlement Agreement Addresses These Details

However, keep in mind that, due to the freedoms that 529 accounts provide to account owners, it is still important for the marital settlement agreement to explicitly state that the funds in the account can only be used for a specific child (while naming/listing the identifying information for that child). The agreement should also address what happens to any leftover funds after the child completes their college education—for example, are they to be used for that specific child’s graduate school? Or are the account owners then free to use the funds as they wish? Etc.  As an aside, the marital settlement agreement should also address how college expenses for the child that cannot be covered by the 529 account (because they do not technically qualify as “qualified expenses” that 529s cover) will be covered.

If You Have Any Questions or Concerns About Assets or Other Family Law Issues in Florida, Contact Our Dedicated Family Lawyers

Regardless of your circumstances, our West Palm Beach divorce attorneys are ready to help you with any family law issue. Contact the office of William Wallshein, P.A. today to schedule a free consultation and find out more about how we help clients ensure that they and their loved ones are protected during and after divorce.





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