Margaret Gettle Washburn, P.C.
(770) 676-1191
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How divorce may affect college savings

Sometimes, parents set up a college savings account for their children, but if the parents divorce, each one may worry about the account being vulnerable. For example, one parent might be concerned that the other parent will use the account for their own purposes or will give the money to children in a future relationship. If the accounts are 529 savings plans or Coverdell Educational Savings Accounts, then the beneficiary can be changed. Georgia parents can specify that the account should only be used for the initially named beneficiary to prevent this from happening.

Custodial accounts are not in danger of this since the beneficiary cannot be changed. Funds in retirement accounts are generally split between the two parents while a qualifying U.S. savings bond can be returned to the treasury and reissued.

There are several other points that should be addressed in the separation agreement. One is procedures for qualified and nonqualified withdrawals. For example, parents might want to discuss what they will do if the child receives a scholarship or decides to live in one of their homes to save money. In other cases, the college savings fund might be a better source of emergency funds than a retirement account. A successor should also be named. Without a successor, if the owner dies, then their new spouse might get the account instead of the child.

From child custody to support to parenting time, negotiations in divorce can be fraught and emotional when children are concerned. Judges make decisions regarding children based on the child's best interests, and parents should attempt to do the same. They may be able to draw up a legal agreement rather than going to court. However, they may want to still work with their attorneys because the issues can be complex whether or not there is a college account involved.

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Margaret Gettle Washburn, P.C.
4799 Sugarloaf Pkwy
Building J
Lawrenceville, GA 30044

Phone: 770-676-1191
Fax: 770-963-2828
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