Some aspects of property division during a divorce can be complicated for Texas couples. One of those complications may arise if parents have a college savings account for their children. This may be in the name of one or both parents, and it is important to take the right steps to ensure that the savings are preserved for the child’s education.
Types of college savings plans
Some parents may have been planning to use money in an IRA for their child’s education. Others might have been saving in a Coverdell Education savings account, a 529 plan or any other variety of savings accounts, including bonds. It is a good idea to list any of these accounts along with all other property in preparation for asset division.
Issues in division
A parent who is worried about the other parent taking the money out of the account before the divorce process is complete can ask the court to take steps to prevent this. To simplify the process of dividing multiple accounts, parents may want to each take possession of an account. Another factor in division may be how much each parent contributed. However, ultimately, this money is for children, not parents, and the decision made should be in the best interests of the child.
Continuing to save
Parents may also want to discuss the status of future contributions to college savings accounts. Their responsibilities for paying for their children’s education may be included in the divorce agreement.
Parents may be able to negotiate the division of college savings accounts and other property instead of going to court. However, as they are doing so, it is important that they understand any penalties or additional taxes that various approaches to division could trigger.