College Savings Accounts & Divorce – A Quick Guide 

During the Love Court on the Alice 96.5 Morning Show, a very important question was raised concerning divorce, kids, and college funds. Here is the question directed at Jessica Anderson from Anderson Keurscher: 

“I was divorced 3 years ago. I have 4 children. As part of the divorce, we each were awarded 2 of the children’s college saving plans to manage and control.  This week I received statements for the accounts he manages which the company sent to me by mistake.  It appears that he recently cashed out the accounts and used our children’s college money for his own purposes. Can I take him back to court over this?” 

We delve into the various facets of this question – let’s unpack it for our readers. 

The First Instinct

The initial answer to this question might sound like a resounding “YES” – but there are a few things to consider here. The first step is to investigate what the decree says. In this case, it is clear that the funds were given to each parent to manage and control, but no clear indication of HOW that should happen and what limitations there might be. 

The direction of the decree is critical and due care must be taken to set up the paperwork with the correct goals, management and restrictions in place. Here are some general guidelines to set up the paperwork correctly: 

  • If the income levels are sufficient, split the costs 50/50. 
  • Rather than general savings funds, direct the funds to a specified savings account. 
  • Usually, assets are divided upon divorce – but assets can also be dedicated to college funds and expenses. 
  • Start the process early to ensure good savings. 
  • Use a mediator during divorce settlements to ensure fair discussions and processes. 

Getting back to the directed question, the father had full right to cash out. It was his property to manage as he saw fit and he took action that cannot now be deemed in contempt if it was not specified in the decree. 

The idea of cashing out, however, might not have been the smartest – since taxes are now being deducted, and the amount that is left over is not the same as the amount invested. This can be a major letdown and misuse of the funds. They lost value upon being cashed out, but letting it sit and be utilized for college as indicated would have stretched the dollar much further. 

Jessica Anderson makes it a clear priority to ask her client whether they would like to access the funds in an emergency or be solely used as college funds. Specific provisions are then placed in the decree to control this decision. Therefore, if the cash was taken out of the account despite the decree, then it can be seen as contempt and taken to court for the ruling. In this specific case, the money might have been utilized for the child’s expenses as the pandemic might have placed parents in dire situations. The desperation for pulling from a college fund might have left the parent without a choice. 

The expense of sending children to school is a huge weight on parents’ shoulders, and the cost has only been increasing. Diligence, information and directions are key to setting up the paperwork to the child’s benefit in any divorce settlement. Clear direction must be given to how and when the money should be utilized to prevent any mismanagement of the funds. Getting the help of industry leaders will ensure your child’s future is safe and planned to the best of your abilities. For any divorce or family law questions, please contact us at 775-406-0211 or visit our website at