Are My Child’s College Savings Divided in a Will County Divorce?
Divorcing couples frequently cite the marital property division process as one of the most difficult parts of getting divorced. Haggling over who owns what property is never easy, and it can be especially difficult if money has been set aside for a specific purpose. Many parents begin setting aside money for their child’s education in a 529 plan and getting a divorce can impact this money. If you find yourself worrying about how divorce could impact your child’s educational opportunities, read on.
What is a Marital Asset?
Anything that is considered a marital asset must be divided in a divorce. In Illinois, almost anything acquired during a marriage is considered a marital asset, including cash, property, vehicles, retirement accounts, stock options, and more. Even if the asset is owned by only one spouse, if it was acquired after the marriage began, it is almost certainly marital property.
What is a 529 Savings Plan?
Parents can begin saving money for their child’s education in a tax-exempt savings plan. These plans are called 529 plans because they refer to the 529 section of the Internal Revenue Service’s code. Illinois currently only has individual 529 plans, although some other states have 529 plans maintained by a state agency or a public college. Parents can contribute up to $15,000 per year to each plan and as long as the money in the plan is only spent on educational expenses, it remains untaxed. 529 plans must have one account owner and one beneficiary, which in this case are a parent and child, respectively.
How Does Divorce Impact a 529 Plan?
529 plans are considered marital property in Illinois, and they remain the property of one parent after a divorce. However, many parents are rightfully wary of this setup because the account owner can change the beneficiary to a step-child or even to the owner of the account themselves. Account owners can also withdraw from the account for non-educational expenses; they just have to pay the appropriate taxes. Spouses who do not trust each other to keep money in a 529 plan for their child may split the funds in the account and each open their own 529 plans.
Meet with a Joliet, IL Property Division Lawyer
Protecting your children during a divorce means protecting their future as well. If you have money saved for your child’s college expenses and are wondering what will happen to it if you get divorced, schedule a free consultation with an experienced Will County divorce attorney with Reeder & Brown, P.C.. We can help you review your situation, set reasonable expectations, and advocate assertively for you and your child’s interests in a divorce. Call us today at 815-885-5980.
Sources:
https://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=075000050HPt%2E+V&ActID=2086&ChapterID=59&SeqStart=6200000&SeqEnd=8675000
https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html#:~:text=A%20529%20plan%20is%20a,of%20the%20Internal%20Revenue%20Code.
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From our office in Joliet, Illinois we serve the communities of Plainfield, Lockport, Crest Hill, New Lenox, Mokena, Romeoville, Homer Glen, Bolingbrook, Naperville, Aurora and Will County.
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58 North Chicago Street, Suite 404, Joliet, IL 60432815-885-5980
