Forward-thinking parents may have their children’s futures in mind from the time they are very young. Well before a child is ready to go off to college, some New Jersey parents may have set aside a significant amount of money for tuition and other expenses. However, when parents are heading toward divorce, what should happen to any college savings plan?
The fate of a child’s college fund may hinge on the type of savings plan the parent chose. This may include a 529 plan, a custodial account or an individual retirement account, to name a few. Some of these and others may carry significant penalties and tax ramifications if the parents decide to withdraw some or all of the money to divide during a divorce. Some parents choose to leave the account as it is, allowing one parent to take ownership of it, but this, too, may have consequences that affect the equitable division of assets.
Additionally, when one parent has control of the educational account, the other parent will need to know how to continue contributing to the fund. He or she may also want assurance that the money will only be used for its intended purpose. Both parents should agree on what to do with the funds in the account if the child should decide not to go to college.
These are only a few of the questions and concerns that may arise when New Jersey parents are dividing assets marked for a child’s education. These and other complex issues carry high stakes in a divorce. It is wise to have a skilled attorney to enhance the chances of obtaining one’s goals.