Section 529 Plans, also known as Qualified Tuition Programs (QTP), are becoming more popular as a means of saving for children’s college education. Consequently, they are showing up more frequently as an asset to consider in a divorce.

The following information about 529 Plans will be helpful for you to know when negotiating property settlements:
 
•   Each account may have only one account owner.
 
•   The account owner can withdraw money from the account at any time, for any reason.

•   If the funds are not used for qualified higher education expenses, the withdrawal is a non-qualified withdrawal; therefore, the account owner must pay federal and state income taxes on any earnings and an additional 10 percent federal tax.

•   The money in the plan is controlled by the account owner, not the child. So if the child decides not to go to college, the child does not have access to the funds.
 
•   Only the account owner can change the beneficiary of the account.  The new beneficiary must be any other adult or child family member of the original beneficiary, including brothers, sisters, aunts, uncles, nieces, nephews, and even the account owner herself.

•   Under a 529 Plan, donors can contribute up to $60,000 per beneficiary ($120,000 if married filing jointly) in one lump sum free of gift taxes.

•   An account owner may designate a successor account owner who will become the account owner if the original account owner dies.

It is possible to change the account owner on the 529 Plan to the other spouse. The Plan custodian will require a letter with instructions from the existing account owner to change the registration of the account to a new account owner.
 
Another option available is transferring a portion of the 529 Plan to a new plan where the other parent is the account owner.