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How are college expenses handled in divorce?

On Behalf of | Mar 8, 2021 | Child Support |

The cost of college has never been higher, but most parents still want to give their kids the option of getting a degree. Yet, although about four in 10 marriages end in divorce, many parents don’t have a plan for how to pay for college on their own.

Unfortunately, child support obligations in Arizona generally end when a child turns 18. After that, courts are reluctant to order parents to share in tuition that averages $20,770 per year for a public, four-year, in-state school.

The good news is that most people negotiate a divorce settlement instead of going to court. When you negotiate your own agreement, there is room to negotiate shared college expenses.

It might start with a 529 plan. These plans are authorized by the state to be a tax-advantaged way to save for your children’s education. Money contributed to the plan grows tax-free and can later be withdrawn tax-free as long as the money is spent on qualifying educational expenses.

How are 529 plans divided in divorce?

Assuming you plan to negotiate how your assets are divided, you can assign the account to either parent. However, if the account is assigned to one parent, the other parent may no longer wish to contribute. It’s often possible to divide one 529 account into two so that each parent can control one of them.

Alternatively, the spouse who doesn’t control the plan can sign up for “interested party statements.” This usually takes filling out just a few forms and gives you quarterly statements. This would allow you to keep tabs on the account and be alerted if there are any withdrawals.

It’s important to understand that the owner of the 529 plan is authorized withdraw the money unless you agree that that should not happen. If the owner withdraws the money but doesn’t use it for educational expenses, that person would owe taxes on the withdrawal.

Finally, your 529 plan may be assigned to only one parent, but the other parent should be listed as a successor owner in case the first parent dies or becomes incapacitated.

Other options for college expenses

If a 529 plan won’t work for you or your 529 won’t cover the full cost of college, you may want to negotiate other arrangements with your divorcing spouse. For example, you may each be willing to pay a fair share toward reasonable college expenses but feel reluctant to agree to an open-ended liability.

You can set limits on your overall obligation. For example, you could agree that your children will go to state schools instead of private schools. Or, you could decide that they will spend two years in community college and then transfer to a university. You might agree that no more than five years of tuition will be split, and that you won’t contribute to graduate school. Or, you could say that, as long as the educational expense is reasonable, each parent will contribute half the cost.

If, later on, your children want to change these plans, you might need to update your agreement. Otherwise, one parent may have to take on the responsibility for any additional expenses. Whatever you decide, be sure to make any new agreements in writing so there is no confusion over who owes what.

Ultimately, college expenses are probably going to be your last shared expenses as co-parents. They outlast child support and, in most cases, alimony. Most parents want to be supportive of their children’s educational choices, as long as the expense is reasonable. You can negotiate the division of college expenses as you would any other aspect of your divorce, with the help of an experienced attorney.