Cindy Allen & Associates PLLC

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Protecting college savings funds following a divorce

When an Oklahoma couple gets a divorce, it can be difficult to ensure that any college funds that were set up end up being used in the way it was originally planned. For example, if one parent becomes involved with another person who already has children of their own or has additional children in the future, the savings could potentially be used for other children's education.

College savings are usually addressed in a settlement agreement. However, how the funds are divided or saved may depend on where the money is being saved and who can withdraw the money. When it comes to where the money is saved, funds that are put into a custodial account can only go towards the child the account was opened for. 529 savings plans, on the other hand, allow for the beneficiary to be changed. Coverdell Education Savings Accounts are similar in that the beneficiary can be changed to other family members following a divorce.

When the student is actually in college, there are a few gray areas concerning how withdrawals may be handled. For example, the student may be able to make qualified withdrawals from the account for rent and school needs. In some cases, there are situations where a parent may have to make non-qualified withdrawals, such as for sudden financial emergencies.

If a couple is going through a high asset divorce complete with real estate, savings accounts and education savings accounts, it can be difficult to fairly divide all of these assets. A family law attorney may assist a with identifying all of the marital assets a couple may have and work to protect these assets when negotiating a settlement agreement on behalf of a client.

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