Divorce can bring out the worst in people, especially when money is concerned. They may become obsessed with splitting everything; retirement accounts, savings and checking accounts and even money put away for their children’s education.
When it comes to dividing cash set aside for kids, divorcing parents in Houston should be wary of the increasing costs of college educations. Indeed, some universities are slowing the rate of increases, but overall, college in Texas is much more expensive that it was 10 years ago, so it is only natural that it will cost more five years from now.
Instead of dividing college funds and 529 accounts, divorcees should consider freezing those accounts. This is a process where no additional deposits would be made to the account, and the existing money could only be used towards education. Despite the freeze, the money would continue to grow according to established interest rates.
This process is important because an account owner could withdraw the money to pay for non-educational purposes (e.g. a car, a big screen TV or a vacation). Even though a tax penalty would be paid, it is not uncommon for selfish or disgruntled parents to use the money on themselves.
However, parents can also agree to continue the contributions to the account and make provisions about how it may be used once a child reaches the age of majority (age 18). This process requires some measure of compromise and cooperation, but the benefit to the child cannot be overstated.
If you have further questions about education savings programs and how they may be affected by divorce, an experienced family law attorney can help.
Source: US News.com, Discuss college savings during divorce, April 29, 2013