College Savings During Divorce Process

It happens quicker than you would imagine. The trials and tribulations of marriage and parenting inevitably morph into the disaster of divorce and suddenly the life you worked so hard to construct is melting away slowly.

As the construction breaks down it becomes increasingly apparent that things which didn’t seem like much of an issue before begin to seem monumental in comparison.

One of these issues arise when it comes to saving for college. Now saving for College on its own is an arduous task that most married couples even struggle to upkeep.  Adding divorce on top of it? Then it really becomes a really difficult road to navigate. But what is paramount, like most things in life is communication. In this case, a little can go a long way.

The communication can be made that much easier if a set framework is already in place. This could simply mean freezing the current 529 plan or splitting it when a divorce occurs and deciding which amount each parent will continue to pay going forward.

But freezing a 529 plan does have repercussions as well. First off, freezing it means that no more deposits can be made into the account. Furthermore the money can only be used towards education for the child and nothing else, it is not an emergency account.

Prior to divorce however it can be used this way should something arise. But framework needs to be put in place so one parent cannot abuse it over the other. In essence when this decision is made the parents are deciding to forgo all of the money they have already saved.

Secondly, what happens if the college expenses are overstated and the final costs leaves a portion of the money back in the 529? Then the money should be split evenly in the same ratio it was deposited. Or it can be used for another sibling.

This is just one of the things to think about when Divorce and College intersect.