When divorcing couples with young children think about the financial support parents will provide their children, the concern is often with the expenses that accrue when the children are small, such as child care. While this often does need to be addressed, parents should also consider financial obligations that could exist when the children are older-such as who will pay for college. While this could be far in the future, many parents open college savings accounts, when their children are first born. The plans specifically designed for this are called 529 college savings plans.
In the course of a divorce what will happen with that 529 savings account will need to be addressed. There are multiple ways in which this could be accomplished. Sometimes one parent will assume control over it. Other times it will be divided. In still other situations the account could be frozen.
Often times, child custody plays a role in making this determination. This is because only the custodial parents assets will be included in the FAFSA, the information from which will be used to determine what, if any, financial aid is made available. Accordingly, in most situations it is best for the noncustodial parent to own that account.
Another issue that could impact paying for college, and should be addressed when a couple is divorcing, is which parent will claim the child as a dependent on their income taxes. The parent who claims the child can receive federal tax deductions. That parent will also be able to seek college credits the IRS gives out.
Because many people who are divorcing are not aware of all the issues that should be addressed, it is important to work with a lawyer who understands matters of this nature.