Can Accounts in a Child's Name be Used for Their College Education Expenses?

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In divorce cases, many issues arise that might not have been issues if the parties had stayed married.  For example, how a child’s college education expenses will be paid becomes a thorny issue once parties are divorced, although it may not have been an issue if they stayed together.  You may have heard the argument from your divorced friends that a court cannot compel a married couple to contribute to their children’s college education, so how can a court compel a divorced couple to pay for it?  The fact is, the courts in New Jersey can and will.

There are several blogs written by our Divorce attorneys that explain the factors that a court will consider in determining what a divorced parent should pay toward their child’s college education.  One of those factors is the financial resources of the child, including assets owned individually or held in custodianship or trust.  In direct contrast to this consideration is the fact that accounts in the child’s name belong to the child, including accounts set up for the child under the Uniform Transfers to Minors Act (UTMA), wherein the parent (in most cases) is the custodian of the account.  Once a transfer is made into an account in a child’s name, whether directly, or under the UTMA, that money becomes that child’s.  If an irrevocable transfer or gift has been made to a child, New Jersey courts have held that said accounts are not to be used to help defray an obligation of the parent, if the parent is financially able to support the child.

If divorcing parents want to use these accounts in the future to help defray their children’s college education expenses, the wording of their Marital Settlement Agreement must be very specific and drafted very carefully.  Even with careful drafting, every case is different and turns on the facts of that individual case. 
 

 Maria Imbalzano is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Ms. Imbalzano.

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