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Handing college savings after a divorce

New Jersey couples who split up often have a number of issues that have to be ironed out during the divorce process, including dividing finances and property as well as making choices about custody. Additionally, if a couple is focused on sending their children to college, they may want to hash out the details of college savings during the divorce process. This will ensure that both parties agree on how to proceed, and legal requirements are easier to enforce than verbal agreements.

One way that people can ensure that college funds are set aside only for educational purposes is to put them in a 529 plan account, a higher education savings account with tax advantages, and freezing the account. While freezing the account would prevent any more deposits from being made to the account, it would also prevent withdrawal from the account for anything but educational spending. If the account is not frozen, either party could take money out for any reason and only have to pay a tax penalty.

Another option is to split a current savings account and divide it into two separate accounts. For example, if a current account had $5,000 in it, two accounts with $2,500 would be created. This would allow each parent to control how the money in their account was invested while still ensuring funding for their children's education.

If someone is going through a divorce, it could be a good idea for him or her to speak with an attorney. A skilled family law attorney could guide the person through the legal processes involved, including dividing assets such as shared accounts.

Source: US News, "Discuss College Savings During Divorce Process", Reyna Gobel, April 29, 2013

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