It used to be the norm in Louisiana and the rest of the country that a child graduated from high school and was considered emancipated from the parents. That was before having a college education was deemed essential for long-term success. Then again, today, there are those who have started to argue that the cost of a college education has become so exorbitant that it may not justify the investment.
Regardless of what side of the fence one falls on in that debate the pressure of college costs are present. Any couple getting married today, committed to the idea of having children, likely is thinking about what it’s going to take to appropriately support children for education beyond high school. And that planning wouldn’t be complete without considering the implications of divorce.
Fortunately, for the past 20 years or so, governments have been promoting the idea of 529 college saving plans. These are the tax-advantaged accounts that allow parents to start socking away money for later tuition. In Louisiana, the program is known as the Student Tuition Assistance and Revenue Trust program, or START.
And what questions regarding 529 accounts might come up in the event of a divorce? Read on.
- Who will assume control of the 529 plan? One of the parents is going to need to take it on. Which it should be may be dictated by the Free Application for Federal Student Aid (FAFSA). Experts note that if the noncustodial parent holds the 529, the amount in the account won’t be counted toward the child’s FAFSA eligibility limits. The custodial parent may be able to be granted some account oversight and be designated the successor owner if the other parent dies.
- Who gets to claim the child as a dependent? There are tax credits available as long as a child is a full-time student. To avoid losing any potential tax advantages, a full assessment of each parent’s earnings should be done.
- Who should have custody? This isn’t just a matter of the here and now. As we noted above, financial aid for a child’s college can depend on the income of the custodial parent. And some colleges may base decisions on broader financial information if ex-spouses remarry.
These can be confusing issues. Don’t assume you will be able to sort them out alone. An attorney can help.