College Costs After Divorce
During your divorce, your Marital Settlement Agreement (MSA) addresses how your children’s expenses will be covered. Often, one parent will pay child support to the other parent to equitably divide the costs to rear them. In South Carolina, child support ends when the child graduates from high school or turns 18, whichever is later. Your state may be different!
However, parents are NOT responsible for their children financially after they turn 18! Not surprisingly though, most parents WANT to help their kids go to college to give them a secure financial future. Sometimes only one parent is willing to do this. Either way, we offer a word of caution:
DON'T SACRIFICE YOUR GOLDEN YEARS FOR YOUR CHILD'S TUITION!
In divorce, most attorneys will advise their clients not to write any clauses in their MSA about covering college expenses. This is understandable and not necessarily bad advice. Your, and your spouse’s, futures are unpredictable and financially binding yourself into something that you may not be able to afford later, especially if you are not required to do it, may not be a wise decision.
But how can you best help your children as divorced parents?
Discuss your goals for your children’s education while you are going through the process.
If you both want to assist your children after they turn 18, you may want to write some language into your MSA that you both desire to assist with their college education and agree to work together to make this happen. This is no guarantee of financial support, but it will help set that intention.
Contribute to 529 Plans
If you already have 529 plans in place, there will be discussions on how to handle the 529 plans post-divorce and how those funds are to be used. Realize that if it is not specifically outlined in your MSA that the funds are to be used for the children and then transferred to the children if not used for education purposes, the spouse who owns the 529 plan could use the funds on himself/herself! Having a financial professional trained in divorce review your MSA BEFORE you sign it is KEY!!
Post-divorce, parents also have the option to start a new plan for their child(ren) and continue to contribute. These contributions may also be tax-deductible on your state tax return. Saving a little each month builds the funds over time, and the funds are also invested to grow even more!
MOST IMPORTANTLY, don’t spend your retirement and savings sending your children to college
Your job is to make YOUR financial future secure. If not, you will be depending on your children financially to support YOU later. Believe me, they will appreciate the fact that your expenses are covered when they are older and trying to raise their own families, especially if you need nursing care! They can pay off student loans when they are working adults.
The bottom line is to SUPPORT your children. Help them apply for scholarships, other financial aid, and student loans if necessary. Assist them in making wise decisions about their education - maybe starting at a technical school to complete core requirements before going to a 4-year college makes the most financial sense! Above all, seek expert advice to protect both your child’s AND your financial futures.
At The Financial Knot®, we can help you balance your family's future with your own financial security. Let us assist you with discovering strategies to fund your child's education without compromising retirement. Contact us today for a free consultation!
The Financial Knot® is another business name for Independent Advisor Alliance, LLC. All financial planning advice is offered through Independent Advisor Alliance, LLC, a registered investment advisor.
