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Protecting children's college accounts in divorce

Parents in California who are getting a divorce might be concerned about any college savings plans they have set up for their children. They may want to take steps to ensure that the accounts are not diverted by the other parent to pay for the education of a new child with another partner or for some other purpose. These concerns may be addressed in the separation agreement.

The first thing to consider is the type of savings plan. A 529 college savings plan allows for the beneficiary to be changed, so a parent may want to add a provision to the separation agreement that the funds in the 529 plan can only be used for the child's education. The beneficiary can also be changed on a Coverdell Educational Savings account. A custodial account, which does not allow for the beneficiary to be changed, may be the best way to ensure that the intended child gets the assets. Roth and traditional IRAs are generally split between the couple while qualified U.S. savings bonds can be returned and reissued in another name.

The separation agreement should cover both qualified and non-qualified withdrawals from accounts along with who the account successor may be. Parents may also want to receive statements their children's accounts.

Dealing with complex separation issues can be easier when going through a mediated divorce. Mediation may be helpful even if a couple does not come to an agreement on every issue. If they are going to be co-parenting, mediation may provide an opportunity to work on conflict resolution.

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