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No responsible parents want their divorce to affect their child’s ability to get the best possible college education. Unfortunately, some couples’ college savings efforts for their children go awry as they divide assets. That doesn’t have to happen. 

A popular tax-advantaged college savings account – the 529 plan – can become misused if it’s not properly addressed in the divorce. These accounts generally allow only one owner (usually a parent), with the child listed as the beneficiary.

What could a parent potentially do with the account?

If your co-parent’s name is the one on the account, it’s important to take steps to protect the funds in it. They have the right to make withdrawals (distributions) or even close the account on their own. If the distributions aren’t used for qualified educational expenses (like books and tuition), they would be taxed on the distributions. 

Another possibility is that they could change the beneficiary to another child (for example, if they remarried and had a stepchild or another child of their own). Note that only one child at a time can be a beneficiary on a 529 account.

How can you protect the funds for your child?

Whether you fear that your co-parent may use the funds in the account for something other than your child’s education or you simply want to be able to maintain some control over it, there are things you can do. It’s possible to include details in your divorce agreement that require that:

• You receive all statements.
• You provide written consent to all distributions.
• The funds can only be used for your and your co-parent’s children. (Parents can alternate their children as beneficiaries as they have use for the funds.)

You may also choose to open a 529 plan yourself for your child. Kids can be beneficiaries of more than one plan. For example, sometimes, grandparents will open plans.

If you also have other individual or jointly owned assets that you’ve earmarked for your child’s education, it’s also crucial that you take care in dividing those to help ensure that they continue to grow until your child needs them. Having experienced legal and financial guidance can help.