When people in Arizona get a divorce, they may wonder how this could change their plans for their children’s college education. A study by Ameritrade found that two-thirds of couples do not have a financial plan in case of divorce or death.
Divorce can be expensive, and it is costlier to maintain two households than one. Therefore, there may be less money available for college. Children may need to consider a state school instead of an expensive private institution. Scholarships, grants, loans and other forms of financial aid may be available to some. Usually, a parent cannot be compelled to pay for graduate school. Divorce agreements commonly specify a five-year limit for education costs.
One step that can help a lot is opening a 529 plan if one is not already in place. With this account, savings can grow tax-free. They can also be withdrawn tax-free as long as they are put toward education costs. However, parents may want to take steps to protect these funds since the beneficiary of the account can be changed, or funds can be withdrawn by the parent who owns the account. The divorce agreement can specify what the account should be used for.
Individuals might also include information in the parenting agreement about the various responsibilities each person will take on, financially and otherwise, that are outside the scope of child support. For example, while who pays for health care is usually accounted for when child support is assigned, parents may want to think about who will pay for things such as extracurricular activities and who will be responsible for getting the child to those activities. Spelling out these expectations in the parenting agreement could reduce the likelihood of conflict later.