A 529 plan is simply a tax deferred college savings plan. The number 529 refers to the section of the IRS code that has established college savings plans. A 529 plan is a tax-free account that can be established up for the benefit of a child. When the time comes for the child to start attending college, then the money from the plan can be withdrawn.

A major benefit of a 529 plan is that they provide to the person(s) who established the account with control. The giver of the 529 plan retains control of the account all the way through the payment to the college. The donor can even take back the gifted money, but they must pay a 10 percent penalty.

College costs can be tremendous today and it is very smart to plan for your child's education even if you are getting divorced. College contribution cases are very expensive, complex and never ending. Many college contribution cases are more complex and take longer than the original divorce case. Moreover, there is nothing worse than reopening up "old wounds" and to litigate with your ex-spouse. Therefore, as college costs continue to rise at an exponential rate, many divorcing couples must seriously consider keeping their 529 plans fully intact and funded.

In most cases the parties will agree that any 529 plans will remain intact for the benefit of the children. Nonetheless, it is important to emphasize that 529 plans have only one account owner, either you or your spouse. The child is only considered to be a beneficiary on the plan. Thus, the named account owner can make a withdrawal at any time for any reason. However, the withdrawal is subject to taxation and to penalties. Thus, it is important to emphasize that a 529 plan is considered to be an asset of the account owner and not the child. Moreover, keep in mind that people get remarried. The new spouse of your ex may be immoral and nag him to cash in the 529 plan to pay for marital expenses. Perhaps a spouse might be desperate and he has to cash in a 529 plan to pay for the mortgage. In the real world scenarios such as this happen all of the time.

Thus, when you get divorced, you have to carefully address how 529 plans will be administered in the future. The most logical solution is to split a 529 into two separate accounts. College savings plans are marital assets and they must be equitably divided if at all possible. If these plans are not spent for college, then the account reverts to the spouse whose name is on the account. Be aware that the spouse/parent who established this account may withdraw the funds, without any fiduciary duty owed to the child.

Given these dynamics, in any divorce context a 529 plan should be split. A 529 plan has just own owner and this is fine when the parents are married. However, when they get divorced all bets are off. In many divorces it is common for a divorced father to be alienated from his children. Consequently, the divorced father could very well cash in the 529 plan if he has no real and substantial relationship with his children. Moreover, given the hard times that we are now in, a financially squeezed parent could very well cash in a 529 plan if he is out of work and is desperate.