Many parents intend to contribute toward their child's college education whether court-ordered or not. Last month President Bush signed the Pension Protection Act. Although the law mainly deals with strengthening the financing rules for defined-benefit pension plans, it also quietly eliminated the 2010 sunset provision for tax-free withdrawals from popular Section 529 college tuition savings plans.
Created in 1996, 529 plans allow after-tax income to be invested in state-sponsored plans and to grow free of state and federal taxes so long as the money is used for qualified college expenses. The tax-free character was set to expire in 2010 but worries have been eleviated by recent action.
With the tax risk eliminated, more parents are likley to invest greater sums in 529 plans and may have more options to choose from. Given that many states have a statutory provision permitting either parent to seek post-secondary education contributions for a child subject to a divorce, it may be wise for either or both parents to start investing in a 529 plan or other tax-free education plan early on to avoid a substantial bill when the child reaches age 18.
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Jennifer Jaskolka-Brown, an Iowa attorney located at 6601 Westown Parkway, Suite 200, West Des Moines, Iowa, (515) 247-4705, practices in general civil litigation with an emphasis in Iowa Family Law issues. She provides guidance in family law matters from divorce, paternity, disestablishment of paternity to adoption,and guardianships. She also provides representation in a wide-variety of civil litigation issues.
