A divorced father of an 18-year-old comes to you seeking legal advice. He is livid with his ex-wife and his divorce lawyer. The divorce was finalized years ago, and he wants your opinion as to whether he can sue his ex-wife, or if his attorney committed malpractice because the funds that were in the 529 plan account were spent by his ex-wife. The issue is intriguing, because the obligation to contribute to their child’s college expenses requires interpretation of their property settlement agreement; there is no statutory obligation in Pennsylvania to contribute to a child’s college costs. The property settlement agreement lists the parties’ assets and liabilities. The asset list includes an entry for $200,000 in the 529 plan account held by the ex-wife, with the child as beneficiary. The agreement states the parties will each contribute to the child’s education after “initially using all the child’s college savings.” The problem is his ex-wife owned the 529 plan account; the child was simply the beneficiary and not the owner of the funds in the 529 plan account. Nothing in the agreement provided restrictions on the ex-wife’s use of the 529 plan account assets.
In those cases where lawyers fail to address the 529 plan funds owned by one of the parents, there is a real risk of malpractice. The father tells you that his ex-wife withdrew all the 529 plan funds to purchase her new Porsche and take wonderful trips to Europe. He wants to know if he can sue under the agreement or under the Uniform Transfers to Minors Act, or UTMA. The family lawyer must be savvy about the difference between the UTMA accounts and trust accounts, as opposed to 529 plan accounts. In this hypothetical, the lawyer handling the father’s divorce failed to properly protect the interest of the father, who assumed the child’s 529 plan college funds were secure.
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