College tuition is often the single biggest financial investment parents will make for their children’s future. It can add up to years of basic cost-of-living expenses for the children and the family. A single year’s tuition at certain institutions may be more than one parent’s salary.
Therefore, most couples start planning for college costs well before their children enroll. Many households start a 529 plan. What will happen with a 529 savings plan in a Washington divorce?
There’s more than one solution for college savings
Joint ownership of 529 plans is typically not an option. Instead, people will need to divide the account. Property division in Washington utilizes a community property approach. That might include the resources set aside in a 529 plan for the college costs of their children.
Sometimes, judges will assign the account to the parent with more time with the children. Other times, they will divide the account into two separate 529 accounts. Each parent will then manage a portion of those savings and continue contributing toward the child’s educational savings goals.
Unfortunately, either approach does potentially put the 529 savings at risk. The parent with control over the account could take distributions from it that ultimately diminish how much is still available when the child who is supposed to benefit from the account enrolls in college.
When parents feel strongly about ensuring that their children have enough resources to move forward with their college dreams, they may want to try negotiating a property division settlement outside of court so that they can control what happens with those key financial resources. Understanding how the Washington courts approach different assets can make a big difference for those preparing for a divorce.