Many parents begin saving for college when their children are young, giving their children a head-start on the ever-increasing cost of tuition. Unfortunately, some may eventually go through a divorce and, even though the college savings is ultimately for the child, it can become yet another bitter point in the battle. It does not have to be this way, though. In fact, many divorcing parents manage to co-save; the key is simply knowing how to discuss some important points.
Who Will the Child Live with Most?
Senate Bill 57 made quite a few changes to Illinois divorce laws, including the voiding of terms like "custody" and "visitation." However, one parent will likely still have the child more often. Knowing (or maybe even agreeing) which parent this will be ahead of time can save you a lot of trouble in the long run, and it can provide some important insight as to what each parent’s financial responsibilities will be in the years to come. This can help couples determine if their child may qualify for financial assistance, and it can provide a launching point for determining which parent will contribute more to the college savings plan.
Who Will "Own" the 529 Savings Plan?
If both parents opened a tax-advantaged 529 college savings plan, they would have to come to an agreement regarding which one will have control over it after the divorce. This can be especially difficult to discuss for two reasons: tax breaks stay with the owner of the account, but ownership can also significantly decrease how much financial aid the child will receive later on down the road if the parent would have otherwise qualified. Most experts suggest allowing the parent with the least amount of parenting time own the account. If, however, this is a concern, parents may wish to consider freezing or splitting it after the divorce.
Who Will Claim the Child During Tax Season?
Like the tax breaks that go with the 529 savings plan, the parent who will claim the child on their taxes each year will receive a break (as long as their salary is below the government maximum). But tread carefully when it comes to this matter; the parent who claims the student as a deduction is also the one that will receive any college credits for the tax year. And, because there may be other benefits tied to the claiming of a child, poor planning can cost your child down the road.
Get Help Structuring Your Divorce
All of these matters – from who will receive the most parenting time to who owns the 529 savings plan and claims tax credits – can be discussed with a skilled and experienced DuPage County divorce attorney to ensure all considerations have been made. Experienced, dedicated, and committed, Mevorah Law Offices LLC offers free initial consultations to help you make the best choice. Call our offices at 630-932-9100 and schedule yours today.
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