Funding a Child’s College Education in a Divorce
One of the critical issues that a divorcing couple must resolve when there are children involved is shared parental responsibilities, and deciding how to pay for college. With tuition rates on the rise, now more than ever it is crucial for both parents to work together to finance their child’s education. In addition, of utmost concern for may families is how to maintain a child’s eligibility for financial aid. This article is a brief discussion of the issues associated with funding college education in a divorce.
Whose assets are looked at for purposes of financial aid?
For purposes of financial aid, the assets of the custodial parent are only considered, albeit, some schools may request both parents to complete additional financial aid forms disclosing the noncustodial parent’s financial information. Additionally, if the custodial parent remarries, the new spouse’s assets may also be assets may also be factored into a financial aid determination.
Who Controls a 529 Plan?
Today, many parents plan for the child’s college education by establishing a college savings plan such as a 529 plan. Although both parents own this fund during the marriage, it is common for one of the parents to take control of the tax-advantaged account in a divorce. In this situation, the parent who controls the account becomes the sole owners, and is the only one with authorized to make decisions over how the funds are used.
It is worth noting, however, that a 529 plan is considered an asset. For this reason, it may be advisable for the noncustodial parent to take control of the plan since it will not be considered in a financial aid determination. While 529 plans offer tax advantages, federal tax deductions are also for claiming a child enrolled in college full time as a dependant. When it comes to a divorce settlement, the parent with higher income is usually designated to claim the child as a dependant.
Ultimately, deciding ownership of 529 plans and claiming children as dependants are central to child custody determinations. Because these decisions can impact a child’s eligibility for financial aid, so a divorcing couple is well advised to work out a mutually beneficial solution.
In the end, child custody decisions must consider funding for a child’s education and how eligibility for financial aid will be impacted. For this reason, divorcing parents are well advised to engage the services of an experienced divorce attorney to resolve the complicated issues.