When going through a divorce the joint assets go through a sort of equalization process, to ensure each party obtains an equal amount of assets at the end of the process. This is true, even for children’s accounts. Sometimes this is an easy and straight-forward process, and sometimes it is not. There can be tracing issues if the separate property has been used to purchase or upgrade a community asset, or if community funds have been used to keep a separate property afloat. Assets can be co-mingled in confusing and complicated ways during a marriage, especially one of long duration.
One thing that should be simple is what should happen to any assets that have been saved for the children. Most often there are college savings accounts (referred to as 529 accounts), and these accounts are unique in that it must be used for college (or trade school) for the child named or a sibling. Neither parent can liquidate it without incurring a penalty, so they should be left alone. Another unique quality of this type of account is that only one parent can be on the account; both cannot be listed. I wish I had a reason as to why… but I cannot come up with any.
Other assets may include personal savings accounts or savings accounts that grandparents or other family members have created. While these can be liquidated, make sure if they are it is because they HAVE to be, not out of spite for the other parent. As always, the children should be insulated from the ramifications of the divorce and so should dollars that have been earmarked for them.
Children’s Accounts in a Divorce
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by: Jennifer Segura