As a divorce attorney in Texas, I’ve observed that one area which often requires careful consideration is a family’s 529 college savings plan. Under Texas’ “community property” system, all assets acquired during the marriage belong equally to both spouses. This includes education savings plans, such as the Texas College Savings Plan and the Lonestar 529 Plan.
Division of Educational Savings Plans in Divorce
When going through a divorce, some individuals might think about withdrawing the funds from their 529 college savings plan and splitting them between the spouses. However, this action can lead to additional taxes due to penalties for withdrawals made for non-educational purposes. An alternative option during a divorce might be transferring ownership of the plan to one spouse.
Ownership Transfer of 529 Plans in Divorce
Transferring the ownership of a 529 plan brings its own benefits in a divorce scenario. Both parents can continue to contribute to the plan, even after the separation. The decision of which spouse should assume ownership depends on various factors, including financial management experience and current account information.
Post-Divorce Possession of College Savings Plans in Texas
After the dissolution of the marriage, the custodial parent often becomes the owner of the 529 plan, with both parents entering into an agreement for future contributions. However, there might be benefits to having the non-custodial parent assume ownership, such as not having their assets and income considered during the Free Application for Federal Student Aid process.
Child Support, College Expenses, and 529 Plans in Texas Divorces
One key point to remember is that in Texas, higher education costs are not automatically included in child support. This issue should be discussed and resolved during the divorce settlement or mediation process.
The team at The Blacknall Firm can represent your interests during a divorce and help address the future of your 529 college savings plan as part of the proceedings.
Please schedule a consultation with us to discuss your case and explore your options concerning divorce and college savings plans in Texas. We look forward to hearing from you.