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What Happens To 529 Plans In An Ohio Divorce?

Divorce forces couples to make very challenging decisions about the future. Those with children have to negotiate not just property division matters but also how they will share custody of or responsibility for their children. As if that would not be difficult enough to handle, a divorce with children can also involve very unusual and potentially highly valuable assets that parents hold on behalf of their children. A 529 account is a perfect example. These specialized financial accounts are a way for parents to set aside money for their children for college tuition costs in the future.

The balance of such accounts could add up to tens of thousands of dollars, particularly if the children are older. One parent may worry that the other might misuse those funds after a divorce. What will happen to a 529 account in an Ohio divorce?

The courts have established a rule in Ohio

Ohio is an equitable distribution state, not a community property state. The solution for property division matters should therefore focus on fairness rather than a 50/50 split of assets. Either the divorcing spouses or the courts will need to make arrangements to divide responsibility for shared debts and ownership of shared assets.

Almost all of the property and income that spouses accumulated during the marriage will be subject to division, and spouses will need to report all of those resources to the courts and one another to ensure an appropriate property division outcome. However, the 529 accounts funded by the parents for the children in the family will not be part of the marital estate that people have to split when they divorce.

There is already legal precedent in Ohio establishing 529 accounts as the property of the children and not marital resources that judges or divorcing parents have to divide. Instead, the adults in the family will need to continue to hold those resources in trust for the children until they are old enough to enroll in college and begin making withdrawals from the account to pay for their educational costs.

Knowing how the courts will handle specific high-value resources can lead to less conflict during property division negotiations conducted as part of an Ohio divorce.

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