College savings accounts are generally created with the intention of helping to pay for higher education expenses. In some divorces, a former spouse could have a child with another person or start a relationship with someone who has children already, which means the money could be used to help someone other than their own child. However, there are ways that California residents may make sure these funds are used for their intended purpose.
For instance, it’s possible to include the college savings account in the separation agreement. This may ensure that the money is used only for a specific child or in specific ways to care for that child. In some cases, money in a college savings account may be used to pay rent or to cover a financial shortfall without having to rely on retirement or other funds.
In the event that the owner of a 529 account were to pass away, the new owner could change the beneficiary of that account. Therefore, it is a good idea to name a successor owner as the asset may otherwise be transferred to another party via probate if no successor owner is listed. Furthermore, it may be a good idea to be listed as a joint account owner or an interested party to the fund as it may entitle an individual to regular account statements.
An attorney may be helpful to those who are going through a divorce or separation. It may be possible for he or she to help with property division issues such as what may happen to a college savings account. Legal counsel may help draft a separation agreement that addresses how such funds can be used or says that the beneficiary cannot be changed for any reason.