When Illinois couples are married and have children, they are often joint account holders. This also applies to their children’s college savings. While this is practical during the marriage, this can cause issues when the relationship comes to an end.
When people decide to get a divorce, they often want to create distance between themselves and their estranged spouse. They start to cancel joint checking accounts and credit cards so that they will not be on the hook for their spouse’s debt. These tasks are completed in order to create a divide between the two parties. However, this is difficult to achieve when the spouses have an ongoing link: their children. When their children have assets, such as a college savings account, they often remain tied together. This can cause issues since many college savings plans allow the account holder to make important changes to the account at any point in time. This can allow a bitter spouse who does not get much time with his or her children to change the beneficiary on the account to a new child born in a subsequent marriage. Many accounts allow for non-educational withdrawals and then penalize the account holder.
In order to combat these potential risks, the parties may add provisions in their separation agreement concerning the treatment of these assets. They may clarify who can use the funds, when a withdrawal is permitted and how the other party will be informed of the withdrawal. They may also consider moving the fund to a different investment vehicle that provides greater oversight such as a trust. Alternatively, they may decide to split the fund into two and let each party manage one fund.
Financial matters such as these are often contentious at the end of a marriage. In some cases the parties and their respective family law attorneys can negotiate an agreement which definitively addresses them.