529 plan accounts are assets to be divided in a divorce, although the divorce decree can make sure the funds are used for the child’s education. Otherwise, the spouse in control of the 529 account can use it for anything he or she chooses (with possible tax consequences).
Click here to read an article about 529 plan rules and tax advantages as of 2026.
529 plans are federally recognized savings accounts for children’s education, but they are held in one adult’s name and they are financial accounts to be divided in a divorce. 529 accounts are not trusts. Federal tax law provides that the earnings on 529 plans are not taxable income. If a parent uses 529 plan funds for a purpose other than the child’s education, the plan’s earnings are subject to being taxed as income and also incurring a 10% penalty, just like a withdrawal from a retirement plan before age 59½. 529 plan funds can be used for:
- Tuition and fees
- Books
- Required school supplies
- Room and board — the beneficiary must be at least a half-time student; includes off-campus housing up to the cost of on-campus room and board
- Computers and related accessories, such as printers, internet access and educational software primarily used by the beneficiary
- Up to $10,000 a year per beneficiary for elementary and secondary school (public, private and religious) tuition expenses.
- Qualified costs associated with apprenticeship programs. Eligible programs can be offered through trade schools and community colleges and must be registered with the U.S. Department of Labor.
- Student loans, up to a lifetime limit of $10,000 per student.
- A rollover to a Roth IRA for the 529 beneficiary, subject to certain criteria and limitations.
Most 529 plans do not permit joint account ownership. Generally, a 529 account can only list one account owner (who controls the funds) and one beneficiary.
In re B.S., __ S.W.3d ___,No. 13-25-00130-CV (Tex. App. – Corpus Christi Edinburg 3/5/2026, no pet.) involved a divorce where the children’s 529 plans were placed under the sole and exclusive control of Wife by the agreed divorce decree. The wife was also awarded all brokerage accounts, stocks, bonds, mutual funds and securities registered in the wife’s name. In a later modification case, child custody was switched and the father convinced the trial court to change control of the 529 accounts to him. This order on the 529 accounts was reversed. The Court of Appeals explained:
It is undisputed that, at the time of the decree, the 529 accounts were composed entirely of funds earned by the parties during the marriage. Therefore, the accounts consisted of community property subject to a just-and-right division.
If the provision in the “Conservatorship” section of the decree did not award “ownership” of the accounts to Crystal, as Dusty claims, then there was nothing in it which would conflict with Paragraph P-10, which explicitly and unambiguously “awarded”to Crystal “[a]ll brokerage accounts, stocks, bonds, mutual funds, and securities registered in [her] name” as her “sole and separate property” and divested Dusty “of all right, title, interest, and claim in and to that property.” Dusty does not dispute that, though the accounts were intended to be used for the children’s education, they were assets of the type describedin Paragraph P-10, they were opened by Crystal, and they were registered in Crystal’s name. We conclude that the divorce decree awarded the 529 accounts to Crystal as part of the just-and-right division of the marital estate. The trial court’s finding to the contrary was error.
It is important to note that, although both parties agreed that the 529 accounts were intended to pay for the children’s education expenses, there was never any legal impediment restricting them from using the funds in those accounts to pay non-education expenses. A 529 account is not an irrevocable trust, the corpus of which may be considered property of the beneficiary, and the income of which may be excluded from community property under certain circumstances. Further, a 529 account is not considered an irrevocable gift or transfer to the beneficiary, as would be the case for an account established under the Uniform Gifts to Minors Act (UGMA). Instead, as Crystal indicated in her testimony, a 529 account is merely a savings account which remains owned by the person opening the account but is given favorable tax treatment under the Internal Revenue Code so long as withdrawn funds are used for certain “qualified higher education expenses.”
(citations omitted).
Click here to read the full opinion.
A divorce decree (and a mediated settlement agreement) should specifically award 529 plans to one spouse or the other. Here is an example:
Property to Respondent
IT IS ORDERED AND DECREED that Respondent, James Gary Jackson, is awarded the following as his sole and separate property, and Petitioner, Andrea Leigh Jackson, is divested of all right, title, interest, and claim in and to that property: ….
R-5. Charles Schwab New York 529 College Savings Program account number x89-01, for the benefit of Jack Lee Jackson.
The divorce decree could also provide:
It is agreed and therefore ORDERED that the Charles Schwab New York 529 College Savings Program account number x89-01, for the benefit of Jack Lee Jackson, shall be used exclusively for the higher education of Jack Lee Jackson and only for expenditures provided special tax treatment under 26 U.S. Code § 529, unless Andrea Leigh Jackson and James Gary Jackson agree in writing otherwise. IT IS FURTHER ORDERED that James Gary Jackson shall provide Andrea Leigh Jackson online access to Charles Schwab New York 529 College Savings Program account number x89-01to see transactions and statements.
Another option:
IT IS FURTHER ORDERED that James Gary Jackson shall before December 31, 2038 transfer any funds remaining in the Charles Schwab New York 529 College Savings Program account number x89-01 on December 19, 2038 (the 26th birthday of Jack Lee Jackson) as follows: The remaining funds, if any, shall be:
[choose one option]
___ Rolled over into a Roth IRA in the name of Jack Lee Jackson
___ Paid 100% to Jack Lee Jackson.
___ Paid 50% to James Gary Jackson and 50% to Andrea Leigh Jackson