UTMA/529 plan used to satisfy child support obligation for college expenses

[salstem]

What is the name of your state (only U.S. law)? Texas

Would it be legal for a father to use an UTMA/529 account that was funded with gifts from friends and relatives of the child to satisfy his contractual agreement to provide for college expenses and tuition?

 

[Ohiogal]

What is the name of your state (only U.S. law)? Texas

Would it be legal for a father to use an UTMA/529 account that was funded with gifts from friends and relatives of the child to satisfy his contractual agreement to provide for college expenses and tuition?

What exactly does it say regarding college expenses? The 529 belongs to the child.

 

[curiousB]

What exactly does it say regarding college expenses? The 529 belongs to the child.

That's actually completely wrong, 529 plans remain the sole property of the parent who started the account. As per the Eighth Circuit Bankruptcy Appellate Panel decision which found that 529's belong to the settlor. You if want to take the tax hit you can cash out a 529 any time you want and they can be raided in bankruptcy actions for newer contributions. IE you cannot hide cash assets in a bankruptcy by sticking it in a 529 plan. The 529does not become the property of the child until the child reaches the age of majority and the settlor agrees to relinquish it. You have to set up a UGMA/UTMA plan if you want the assets to belong to the minor child. It's important to underst and that UGMA/UTMA contributions are not the same as the 529 plans.

The 529's are a good way to go both in terms of taxes and parental involvment in post-secondary education. If you set up the UGMA/UTMA plans the money is the child's and you cease having a say in the use of those funds. With a 529 you have the option to cash it out if your child isn't going to college, or an acceptable program of study. The downside is 529's are vested in various securities and stocks, thus they can lose value in a down market.

 

[Ohiogal]

That's actually completely wrong, 529 plans remain the sole property of the parent who started the account. As per the Eighth Circuit Bankruptcy Appellate Panel decision which found that 529's belong to the settlor. You if want to take the tax hit you can cash out a 529 any time you want and they can be raided in bankruptcy actions for newer contributions. IE you cannot hide cash assets in a bankruptcy by sticking it in a 529 plan. The 529does not become the property of the child until the child reaches the age of majority and the settlor agrees to relinquish it. You have to set up a UGMA/UTMA plan if you want the assets to belong to the minor child. It's important to underst and that UGMA/UTMA contributions are not the same as the 529 plans.

The 529's are a good way to go both in terms of taxes and parental involvment in post-secondary education. If you set up the UGMA/UTMA plans the money is the child's and you cease having a say in the use of those funds. With a 529 you have the option to cash it out if your child isn't going to college, or an acceptable program of study. The downside is 529's are vested in various securities and stocks, thus they can lose value in a down market.

Actually you are wrong as well. 529s can very well belong to the students. We don't have enough information at this poitn to determine WHO started the plan. We also don't know what the court order states regarding the 529 and college contributions.

 

[LdiJ]

What is the name of your state (only U.S. law)? Texas

Would it be legal for a father to use an UTMA/529 account that was funded with gifts from friends and relatives of the child to satisfy his contractual agreement to provide for college expenses and tuition?

This is not a legal response.

If dad did not fund the 529 plan, then dad would be a bit of a scumbag for trying to claim that it was his share of the college expenses. If dad funded the plan, he would not be.

 

[curiousB]

Actually you are wrong as well. 529s can very well belong to the students. We don't have enough information at this poitn to determine WHO started the plan. We also don't know what the court order states regarding the 529 and college contributions.

529 plans belong to whoever starts to the account, it might not belong to dad, but it certainly does NOT belong to the child. It cannot belong to the minor child until he/she reaches majority (or 21 if the terms of the 529 state that age). A family court ruling cannot change tax law and a family court judge lacks the authority to transfer ownership of a 529 plan.

You just simply don't seem to know the differences between 529's and the UGMA/UTMA programs. If you don't know it's better to check than it is to give someone bad advice.