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529 Plan as Marital Property in Equitable Distribution

Question: I am a mother from Summerfield.  I have been saving for my children’s college, but I am now faced with divorce. My ex-spouse is the owner of the 529 Plan.  What happens to the 529 Plan in my divorce?

Answer:   While the intent of the 529 Plan is to provide college funding for your children, you may find it in the fray of a divorce settlement.  If you make contributions to a 529 Plan during the marriage, then the account value of the 529 Plan is part of that marital estate for the division.  What can you do to preserve the 529 Plan for the children in the divorce settlement?

You need to educate yourself on your 529 Plan and how it fits into your North Carolina equitable distribution.  In a high net worth divorce, there are risks that your child will not end up as the Beneficiary of the college funds unless you take the appropriate action.  Here are some key points you need to understand:

The maximum amount you can add to the 529 Plan is $410,000; The minimum contribution is $25.

  1. The 529 Plan investments grow tax-free for the North Carolina and federal income tax laws/returns.
  2. There are various investment options for a 529 Plan, and perhaps you will want to make some agreements in your divorce settlement on how to manage the money in the Plan.
  3. You should study the North Carolina website for 529 Plans. offers a lot of information.
  4. 529 Plan contributions are NOT tax deductible under either North Carolina or federal tax law.
  5. You will want to study the account statements for your 529 Plan. If you do not have the statements, obtain copies in discovery.
  6. Your ex can change the Beneficiary of the Plan unless you put lots of restrictions in your divorce settlement document. If your ex is going to continue to own the 529 Plan after the divorce, then you want to “lock in” how the money will be used, invested, and distributed. Address what happens to the money if your child does not use it for college. Typically, the money distributes to you and your ex, but specify this in the divorce settlement. You should also require that you receive an account statement annually, at a minimum.
  7. The official title of the owner of the 529 Plan is “Participant.” The official title of the person who receives the college funds is “Beneficiary.” Each account has one Participant and one Beneficiary. The Participant can make a transfer or rollover to another 529 Plan. Or, the Participant may change the Beneficiary to someone from a class of Beneficiaries, which can include members of the Participant’s “new family”. You will want to study pages 8 and 11 of the North Carolina 529 Plan Description. There is a new Program Description as of December 7, 2015, which is downloadable from