Have you considered college savings when dividing assets?

Our Maryland readers may have seen previous posts here discussing the variety of problems that can be encountered by a divorcing couple in attempting to reach an equitable division of marital property. Of all the issues involved in the divorce process, property division can be the most complicated in many cases. Why is that? Well, oftentimes some assets just cannot be split, and in other instances assets are for the good of someone else – specifically college savings accounts for the divorcing couple’s children. A recent article noted the difficulty in dealing with this type of asset and offered a few tips.

There are many options for parents who are looking for smart ways to save money for a child’s education. Specific types of accounts, like the popular 529 plan, are some of the most common methods of utilizing a long-term savings mechanism. In deciding the division of property in a divorce, these types of accounts will need to be addressed.

These accounts, although always set up with the child’s best interest in mind, can be subjected to a split in the divorce process. The judge orders the funds divided equally between the parents, and then it is up to each individual ex-spouse to decide how to move forward with college savings.

However, the article indicates that the best idea is usually to attempt to come up with an agreement outside of court that will ensure that funds are available for the child’s college education. This may sound like wishful thinking for those couples who can’t agree on any issue in a divorce, but saving for college is an obvious choice for an issue to bridge the gap between bitter divorce participants because of the intention for those funds to help the child. Reaching an agreement that can be maintained post-divorce can leave both spouses with the feeling that at least one good thing has come out of a potentially negative situation.

Source: usnews.com, “Discuss College Savings During Divorce Process,” Reyna Gobel, April 29, 2013