Around 40 percent of marriages end in divorce, but according to a study by TD Ameritrade, about two-thirds of couples have no financial plan in place to deal with divorce or the death of a spouse. Divorce may leave some parents in California struggling to pay for their children’s college education, but there may be steps they can take to help secure at least some of that funding.
Divorce means splitting households, and two households are more expensive to maintain than one. Spousal and child support take priority over college educations. Parents may want to consider whether they can afford a private or state school and explore scholarships, grants and loans. A parent cannot be required to pay for a child’s graduate school or expensive undergraduate education, and agreements that deal with a child’s college education usually specify five years of support.
Some parents may already have a 529 plan in place, and those who do not can start one. This allows savings to grow tax-free. On withdrawal, money is not taxed as long as it is used for education. However, parents may want to include language in the divorce agreement that specifically addresses how this account should be used. Otherwise, the parent who owns it could make withdrawals from it or change the beneficiary.
How to pay for college is just one of a number of issues parents will need to think about when divorcing. They may also need to consider what kind of schedule they want to have for child custody and visitation, including holidays and vacations. People may want to create a parenting agreement that addresses any areas of concern and makes some consistent rules that both households will share. For example, the parenting agreement could address which parent is responsible for certain extracurricular activities, bedtimes and more.