Divorcing clients and their attorneys may overlook educational plans when drafting settlement agreements. Many are comfortable simply allocating these plans in the settlement agreement to the beneficiary children.
However, these accounts are risky to ignore. Their success depends of whether the child has qualified expenses, obtains scholarship and the like. Allocation of education accounts to a custodial parent may result in that parent becoming the beneficiary of the education accounts after taxes and penalties. Alternatively the child beneficiary may be allocated funds before that child is mature enough to manage the investments.
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