How is a Child’s 529 Plan Handled in a Divorce in Texas?

The Texas College Savings Plan is a tax-advantaged 529 college savings plan that is designed to help parents save money for their child’s college and certain other qualifying educational expenses. If you are getting divorced in Texas, a 529 plan is one of many different financial assets that you may need to address as part of the process. In a Texas divorce, a 529 plan can create confusion because the child is the beneficiary, but one or both spouses may have funded the account with marital earnings. Texas community property law governs how courts analyze ownership and division. Here, our Houston property division attorney provides a guide to the 529 plans and divorce in Texas.

What is a 529 Plan?

Broadly explained, a 529 plan is a qualified tuition program authorized under Section 529 of the Internal Revenue Code. It allows an account owner to contribute after-tax funds that grow tax-deferred and may be withdrawn tax-free for qualified education expenses. The beneficiary has no ownership interest in the account. The account owner retains control over contributions, investment choices, distributions, and beneficiary changes. That control matters for a Texas divorce.

The Creator, Not Beneficiary Owns the Plan

In Texas divorce proceedings, courts focus on legal ownership, not intended use. The parent who establishes the 529 plan and retains account control is the legal owner. The child holds no vested property interest, even if the account exists solely for the child’s education. Because the owner controls withdrawals and beneficiary changes, Texas courts treat the account as a divisible asset rather than a custodial account held in trust for the child.

A 529 Plan is Often Titled in the Name of One Spouse

Most 529 plans list a single account owner. The most common owner of a 529 account is the parent of a child. To be clear, under Texas divorce law, the titling alone does not determine how the property is handled. Courts examine when the account was created and the source of contributions. If a spouse created the account during the marriage and funded it with community earnings, the account is presumptively community property. It does not matter how it is titled. 

529 Plans Can Still Be Community Property in Texas 

Texas follows a community property regime. Assets acquired during marriage are presumed community property unless clear and convincing evidence proves otherwise. Contributions made to a 529 plan during the marriage using wages, bonuses, or other community funds remain community property. Courts may award the account to one spouse while offsetting its value through other property or impose restrictions on withdrawals to protect the child’s educational purpose.

Speak to Our Houston Community Property Lawyer Today

At Lindamood & Robinson, P.C., our Houston divorce lawyer has extensive experience with divorce cases. If you have any questions about the division of 529 plans in a divorce, we are here as a family law resource. Contact us today for a fully confidential case review. We provide family and divorce representation throughout all of Southeast Texas.

Source:

texascollegesavings.com/