529 Plans and College Expenses

Understanding Your Financial Obligations

Section 513 of the Illinois Marriage and Dissolution of Marriage Act (IMDMA) addresses the allocation of college expenses between parents and the child attending college. Specifically, this section outlines the factors that a court should consider when determining the allocation of college expenses, as well as the types of expenses that are eligible for reimbursement and allocation between the parties.

Under Section 513, the court may consider a variety of factors when determining how to allocate college expenses between parents. These factors may include the financial resources of each parent, the standard of living the child would have experienced had the marriage not been resolved, the child’s financial resources, and the child’s academic record. The court may also consider whether the child could reasonably attend a less expensive college or university.

It is important to note that the factor of “financial resources of each parent” can include income or assets of a new spouse of either party. While the new spouse will not be required to contribute directly to college expenses, the presence of their income and assets can be taken into account when the court determines how much each parent should be responsible to contribute. For example, if one parent reduces their hours at work, or stops working altogether, as subsequently reduces their income after they get re-married as a result of their spouse providing for them financially, while the parent may have a reduced income, the income of their spouse could be imputed to them for purposes of determining contribution to college expenses.

The court may require the minor child to contribute to a portion of their own college expenses. Scholarships the minor child receives for their academic performance can be counted towards their contribution to the expense. 750 ILCS 5/513 also allows the court to require parents and the child to fill out the Free Application for Federal Student Aid (FAFSA).

In addition to these factors, Section 513 also outlines the types of expenses that are eligible for reimbursement. Absent good cause as to why a parent shouldn’t contribute, these expenses include tuition, fees, room and board, and other related expenses, such as books and supplies. It also includes medical expenses, including health insurance and dental expenses through college and up to five college applications and two standard college entrance exams. 

A key provision included in the statute is the cap that is placed on a parent’s obligation to contribute to room and board and tuition. Pursuant to 750 ILCS 5/513, there is a cap placed on the obligation that can be placed on either parent, which is the amount of in-state tuition and housing expenses for a student at the University of Illinois at Urbana-Champaign. A parent cannot be ordered to pay above this amount for tuition and room and board. 

College Savings Accounts and 529 Plans

In Illinois, college savings accounts are typically set up as 529 plans. These plans are designed to help families save for higher education expenses. In Illinois divorces, parents may include provisions for existing 529 plans in their parenting agreements or divorce decrees. These provisions should specify how or if the 529 plan will continue to be funded, who will be responsible for managing the plan, and how withdrawals will be made to pay for college expenses. 

When parents are getting divorced, it is important to consider how the college savings account will be divided. In Illinois, college savings accounts that are funded throughout the marriage will be considered marital property and subject to division in a divorce. This means that both parents are entitled to a portion of the account, even if only one parent made contributions with marital income or assets. There are several ways that college savings accounts can be divided in a divorce. One option is for the account to be divided in half, with each parent receiving an equal share of the account. If the parties elect to split the account, there should be provisions in place for how the money from the account can be used so that it is preserved for the minor child.

Another option is for the parties to keep the account as is. In this case, there should be provisions that neither party contributes into or pulls money out of the account following the dissolution of marriage. This will protect from issues down the line in determining what the value was at the time of the Judgment for Dissolution of Marriage and what each party contributed after.  If the account remains intact, then the account can be first applied to the outstanding college expenses, and then the parties’ obligations be determined based on the remaining expenses owed. 

It is important to work with an experienced divorce attorney to understand your financial obligations and ensure that any college savings account is divided fairly and in compliance with state regulations. With the right approach, parents can help ensure that their children’s higher education expenses are adequately funded after a divorce. Please contact The Law Office of Erin M. Wilson to schedule a consultation today.

NOTICE: This blog is intended solely for informational purposes and should not be construed as providing legal advice. Please feel free to contact us with any questions you may have regarding this blog post.