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College Savings and Divorce in Texas

To get a divorce in Texas and not have some language contained in your Final Decree of Divorce that considers the need to prepare and save for your child's college education would be a huge mistake. The failure to plan for college means that you should prepare to fail regarding your child's college savings. Prepare to save or prepare to tap into retirement funds that you had previously had earmarked for your use. The other factor to consider is that if you remarry, your new spouse's income may become a consideration in any subsequent legal battle between you and your ex-spouse regarding your child's college savings.

What kind of programs are out there to help you save for your child's college education?

The federal government offers loans, grants, and scholarships of their own to have facilitated your child's education. Private entities offer scholarships in varying amounts. It is up to you and your child to seek out the source of these scholarships and apply for them. As with any government program, there is the risk that the start of the money could dry up over time. Banking on the availability of student loans in the future may not be an intelligent move depending on how far into the future your child's college career will be starting.

College Savings Plans

Texas (like many other states) offers a college savings plan for parents and families of students known as a "529" account. A previously created 529 account can be divided up in a divorce, and the assets split between you and your spouse in any way you see fit. Those funds can you are entitled to in the divorce can be rolled into a new 529 account without incurring any taxes or penalties. As it pertains to your final decree of divorce, it is worthwhile to specifically state that these funds must be used for your child's education and not for any other purpose.

The most significant benefit that I can conceive of regarding a 529 college savings plan is that the money invested into the project grows tax-free. It does because the principal amounts are taxed as earned income as you go along. As long as you use the money in the 529 for college savings, you will not pay tax on the growth within the account. Unlike the rules for IRAs, there are no artificial income limits to take advantage of this tax-free bonanza.

The State of Texas has multiple plans available to families with children planning on attending college. You can research and see which method suits you and your circumstances the best. From my vantage point, a prepaid college savings plan ensures that you are not affected by inflation and the increase in college costs. You can assume the cost of attending college will increase by 7% per year. The other primary type of 529 in Texas allows you to invest the money into mutual funds that have more variance in growth and loss in value. You can determine which you prefer mainly based on your risk tolerance.

How your kids and money concerns will weigh on your divorce priorities

The two most important aspects of any divorce are your children and money. If you don't have one or the other, your divorce may be somewhat easier to digest. If you happen to have both, you are in for a whole-fledged divorce experience. As in most areas of your life, preparation is vital if you want to escape from your divorce with a solid relationship for your children and a firm grasp of the money that is rightfully yours.

From your children's perspective, you should not inundate them with information beyond what their capabilities are in terms of processing that information. A younger child will not understand as much as an older child when it comes to the circumstances of your divorce. Even as it pertains to your older children, they may not (and probably should not) want to know all that much about your divorce.

Your first instincts as a parent are likely to want to protect and shield your children from the ill effects of your divorce. You know the individual coping skills of each of your children when it comes to handling adversity. Before deciding to talk to your child above your divorce, bear all these circumstances in mind. When you speak to your children, if at all possible, do so with your spouse. A united front in this regard can show your children that you both still care about them and that the support system that you offer them is still in place even if your marriage will not be.

As we have been discussing money concerns in your divorce for the better part of a week, we have not reached the point where your money and your children intersect. Any parent can tell you that having a child costs money- now and in the future. You plan for your own life, but you are likely thinking more about your child and what their life will be like once the divorce is complete.

Depending on your position on how to talk to your child about the money, you may have a relatively easy time discussing the effect of divorce on your family finances with your child, or you may struggle to do so. Many parents that I have worked for have declined to discuss the issue with their children. Ultimately it is your decision as a parent to determine what level of conversation with your child is appropriate for money.

However, from where I sit, I would offer to you that deciding against talking to your children altogether about the financial impact of divorce on your family is a wasted opportunity. If you and your spouse have determined that a divorce is the only option for your family, failing to discuss the ramifications of that divorce with your children can be seen as a missed opportunity to teach them life skills and maturity.

How your child reacts to your divorce depends in large part on their age

Younger children consider divorce more from their perspective. Will they still be able to play soccer? Will they be able to attend the same school? That sort of thing. The thought of their mom and dad not living together anymore tends to hit them more than older children.

Children between the ages of 10 and 13 tend to have more advanced questions and concerns- notably about their role in the divorce. This is the age group where kids blame themselves more often than any other. You, as a parent, will have to take the lead and assure your pre-teen that they had nothing to do with the divorce.

Older children run the gamut of reactions. From the positive side of things, teenagers can take the lead on doing more around the house. Teenagers can be amazingly resilient, whether caring for a younger child if you have to work late or to fill in for you around the house when it comes time to do some weekend cleaning. On the other hand, teenagers can check out entirely in some instances if they feel like their parents are checking on one another and their family. You know your family better than I do, so it is up to you to take the necessary steps to ensure that conversations with your children about your divorce are fruitful.

Helping your kids handle your divorce from a financial vantage point- tomorrow's blog post topic.

If you are interested in how money and your children are related, please come back to our blog tomorrow to read about this subject. Your children will need your help to understand how your divorce will impact you and your family financially. We will do our best to share some advice from our experience representing many families across southeast Texas in divorce cases.

Any questions you may have regarding family law in Texas can be addressed to the attorneys with the Law Office of Bryan Fagan, PLLC. We offer free consultations with licensed family law attorneys six days a week.

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