During an Illinois divorce, all of the assets and debts that a married couple has acquired must be equitably divided. “Equitably” does not necessarily mean equally; rather, it means that the property must be divided between the spouses in a fair manner.
All property that a married couple has acquired from the date of the marriage until the finalization of the divorce is considered marital property subject to division in Illinois. Many spouses have acquired numerous types of bank accounts, such as 529 savings accounts, Uniform Transfer to Minors Act (UTMA) accounts, and Uniform Gift for Minors Act (UGMA) accounts:
529 Savings Account
Illinois 529 savings plans allow parents to invest in stocks, bonds, and other assets to grow a college account for their children. The amount of money the 529 account accumulates depends on the performance of the investments.
Uniform Gift for Minors Act (UGMA) Account
UGMA accounts allow parents to serve as custodians in a trust that may include real estate, bonds, stocks, or other types of property. Money placed into these accounts is deemed a gift to the child for tax purposes.
UGMAs contain more limitations as to what types of property may be transferred.
Uniform Transfer to Minors Act (UTMA) Account
UTMA accounts also allow parents to transfer property to their children. It may include money, insurance policies, real estate, stocks, and other types of property.
Unlike UGMA accounts, UTMAs allows parents to transfer just about any type of asset to their children.
Dividing College Savings Accounts in a Divorce
Although the purpose of a college savings account is to save money for a child’s education, the accounts are generally owned by the parents until they are transferred to the child. Therefore, at the time of a divorce, some of these accounts must be divided, as they are included in the marital estate. Experienced Illinois divorce attorneys are available to guide parents through this complex process.
As for 529 accounts, one spouse may keep the account in its entirety. This spouse would be responsible for managing the account and providing the funds to the child once the child enrolls in college. The parties may agree to this scenario, or it may be ordered by a judge at the end of a trial.
The spouses may also split the account, with each spouse being responsible for the portion they control. Again, the parties may either agree to this setup on their own accord, or a judge may order it.
Language is Key in the Final Divorce Decree
Regardless of how accounts are to be managed post-divorce, specific language should be included in the final divorce decree—whether it is obtained through settlement or at the end of a trial—that dictates how the money in the account is to be managed. For example, the language that states the money is only to be used for the child’s college education may be included in a divorce decree.
Some spouses worry that their exes may withdraw the money and spend it on themselves—but with protective language in place, this scenario is much less likely to occur. If a spouse does withdraw the money and spend it, the spouse would be violating the court order and could be held in contempt of court.
With UTMA and UGMA accounts, the parents serve as custodians of the assets in the account. Any property put into these accounts is considered an irrevocable gift. Generally, these accounts are considered the property of the child and would not be subject to division in a divorce. However, custodianship of the account may change after the divorce (for example, only one parent may be custodian; or now both parents are joint custodians of the account).
Call Today for Help with Property Division Matters in Your Divorce
The attorneys at Manassa Bojczuk, P.C. are experienced in all types of divorce matters, including those that involve complicated property division issues. To schedule a free consultation at our Barrington or Crystal Lake offices, contact us today.