Jonathan Marks, STL Moms: Divorce and College Savings


Well, have you started saving for your kids’ college? What happens to that money if you get divorced? Jonathan Marks with The Marks Law Firm, here this morning with more on that. Good morning to you.

Good morning, Margie.

Yeah, so the big question is, will the money still be there if you get divorced?

Well, most of the time the answer is yes. I mean, the money will be somewhere, whether it’s designated and set aside for the child and the college education. Or, if it’s actual marital property, it has to be divided by the court. That’s a different question.

Yeah, and most couples, either you’re looking at an IRA, you’re looking at a 529 Plan, but the courts handle each differently.

Sure. So, let’s assume that somebody decided to put funds just into a retirement account and do an IRA and save it for purposes, maybe college or retirement, then that’s going to be general marital property. And so, at the time of the divorce, the court’s just gonna divide it as they would a home or a normal savings account or a checking account, whatever it may be. And those funds are gonna get divided between the two spouses.

All right. What about a 529 Plan?

So that’s different. I mean, the 529 Plan, in and of itself, it’s gonna go in and have tax-deferred, and then when you bring it out, it’s obviously gonna have no taxable consequences and is really designated specifically for a college savings account. It also depends, though, how you would’ve set it up originally to make sure that problems don’t occur when you do get divorced.

Right, I mean, if you only have one name on it, or the beneficiary, I mean, couldn’t a spouse just change the beneficiary?

Yeah, it just depends on how the accounts are set up. So let’s say it’s just a traditional 529 Plan. Typically, when you set it up at the time, you want to make sure that you do it under the Gift Act for Minors, for purposes of being able to designate who that account is for. So once it’s done originally, you’ve locked in, so to speak, who the custodian is going to be and who the beneficiary is gonna be. So even at the time of the divorce, you know who the funds are gonna be used for and that child is gonna receive the benefit, regardless of what happens. Look at it more of as a gift, as opposed to marital property to be divided at the divorce.

Can the spouses enter into some kind of an agreement, I guess, going into or out of a marriage?

Yeah, so there’s two ways to look into it. If you’re doing it going into the marriage, obviously, if you have a prenuptial agreement, you can always designate that the two of you, if you have children, how you’re gonna end up setting up funds for education, how those things are gonna be divided at the time of the divorce. The other aspect of it is, is if you are getting divorced and you do have a college account, whether it’s a 529 or a Missouri MOST account, always think about the fact that what you could do is just split the accounts, so that, whatever the sums are, you divide them equally between the two parents. And at the end of the day, you each would have the ability to then contribute to those accounts going forward, for the benefit of your child.

What’s the worse possible option, do you think?

Well, probably just putting into a general savings account. So, what can happen sometimes is that parents believe that they’re just putting money aside for the college education, and then they get to the divorce, financial circumstances have changed, obviously. Then they’re gonna have two separate households, and then those funds are just considered normal marital property. They’re divided and you’re starting from scratch, basically, for purposes of how you’re gonna designate funds for purposes of the child’s education.

Certainly something to think about.


All right. Family Law Attorney, Jonathan Marks, thanks for your time this morning.

Thank you.

For more information on The Marks Law Firm, just head to the STL Mom’s tab. John and Randy?

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