Although good planning for college can be a positive element of one’s parenting style, some North Carolina divorces can create challenges for parents who have saved carefully for their children’s higher education expenses. Property division typically brings attention to all assets and debts held by parents, which includes special savings accounts for the education of their children. It is important to understand the implications as these assets are divided in a divorce agreement.
As assets are transferred into 529 savings plans for college needs, they can be considered as completed gifts to one’s children. These are typically funded with money that has already been taxed, and they may be attractive alternatives to tapping into one’s retirement funds when facing the end of a marriage and its attendant expenses and financial complexities. In some types of education savings accounts and 529 savings plans, the beneficiary can be changed by the account’s owner. This could prove challenging if the party owning an account remarries or has other children as there would be room for the funds to be redirected. A custodial account, however, cannot have a change of beneficiary.
Parents may not think about the potential for divorce action at the time they start saving for a child’s education. However, it is wise to consider how an account might be handled not only in the event of divorce but also in case of a parent’s death. Steps can be taken to ensure that a child’s interest is protected. For example, the party not owning the account could request to be listed as an interested party to ensure access to copies of account statements.
In a high asset divorce, education savings accounts and other assets for one’s children might come into play. Sound legal assistance can be helpful as an individual seeks comprehensive financial information before agreeing to a settlement.