In the last section of our College Expenses series, we address the issue of allocating post-high school expenses and your plan in which to do it.
Allocation of Post-Highschool Expenses. Allocation of college expenses is generally stated as a percentage, a dollar amount, for a specific type of expense, or a combination of all three. Section 513(b) of the Illinois Marriage and Dissolution of Marriage Act requires courts to consider all reasonable and relevant factors and specifically states four factors considering financial resources, standard of living, and the child’s academic performance. (See Part I)
The four factors are fairly straight forward and address matters that any family would face. What many parents do not realize is that unlike child support, the first factor under Section 513(b) can include an examination of a new spouse’s income to the extent that income “frees up” a parent’s income to pay for college. Also, under the second factor, a child may be required to contribute to his or her education expenses, such as from savings or earnings from work.
Also worth noting, if a parent saves money to put toward his or her share of the expenses, how that money is applied under Section 513(b) – in the parent’s column or the child’s column – is dependent on how that money is held. For example, 529 Savings Accounts are in the “holder’s” name with the child named as a beneficiary. Therefore, these accounts are not generally included under the child’s available resources, especially where the parent has been the exclusive person depositing those funds. However, if a savings account or trust is in the child’s name and a parent is only a custodian, then those funds are generally included under the child’s available resources.
To help prevent future conflicts, parents may expressly put aside or designate in their settlement agreements certain assets held at the time of the divorce for the child’s future education expenses . For example, they may state that 529 accounts maintained during the marriage shall be applied toward college expenses before determining the parents’ individual obligations. Parents have also included a requirements that the child must apply for loans, scholarships, and grants and that each parent must cooperate in applying for financial aid.
Your Plan. Preparing for college is complex enough without the additional factor of working with your ex-spouse or soon-to-be-ex-spouse. By doing some homework before diving in, you can help make the process smoother. First, are you divorced – also called “post-decree” – or is your case still pending – referred to as “pre-decree”? If you are post-decree, pull out your Judgment for Dissolution of Marriage and read any provisions addressing college expenses. Compile information regarding your child’s school choices, tuition rates and other fees, payment plans, anticipated other expenses, financial aid, due dates, and the like. Take a look at your financial resources, your child’s resources, and, to the extent known, your ex-spouse’s resources. Gather the supporting documents and necessary forms. Then talk to your ex-spouse about your proposal for allocating expenses to see where there are any disagreements. If you cannot resolve them, do not wait before bringing the matter to court. Timing is crucial, so you should start planning sooner rather than later.
If you are pre-decree, and you and your spouse disagree about education expenses due before the divorce is final, you do not have to wait. You may petition the court for a temporary order allocating expenses until you reach a final resolution in the case.
Remember, it is always best to consult with an attorney if you have any questions regarding your settlement agreement as it relates to college expenses. Our office would be happy to schedule a free consultation to assist. With some thought and planning, you can successfully get through this process and focus on what is most important – your child’s future.