Family Law

Court Order: Pay The $50,000 Tuition

Although not the law in California (as the article correctly identifies), a court may order some residents of other states to pay college tutition.

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Court Order: Pay The $50,000 Tuition
Forbes.com
Marlene M. Browne 02.12.07, 6:00 PM ET

In the U.S., tuition and board at private universities now runs near $50,000 per year. If that isn't shocking enough listen to this: You might be surprised to learn that your legal duty to support your children might not end when they receive their high school diplomas.

According to the ABA Family Law Section Web site: If your divorce occurs under the laws of Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Idaho, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Virginia, West Virginia, Wisconsin, or Wyoming, you cannot be ordered to contribute toward your kids’ so-called “post-secondary” education--what is more commonly known as “college” or “vocational training.”

These states will, however, honor and enforce a parent’s own marital agreement (i.e., divorce contract) that includes a provision compelling him to pay college costs. So, if you divorce when your daughter is seven, and you agree to be responsible for some or all of her future college expenses, be prepared to pony up when Stanford accepts her as a freshman. To protect yourself, consider limiting your exposure, say, to the cost of an in-state, public university. For additional defense against future litigation, define exactly what you are willing to pay for. For instance, left open to the imagination--and a few appellate court opinions--the phrase “college expenses” has been interpreted to include not only the foreseeable tuition, room, board, books, activity and labs fees; but also, transportation costs (which may include a car and related fees), cell phone charges, computer costs, health and auto insurance premiums, fraternity/sorority dues, monthly personal--and even clothing--allowances, as well as use of a credit or debit card to cover “emergencies.”

Also, under the laws of most states, your kids’ funds--whether held in a traditional “Crummey” trust or custodial account--may not be available to defray the costs for which you’ve contracted to pay. Consequently, be careful how you word your divorce agreement. If you want your daughter’s trust fund or custodial account to be applied to her college costs, spell out this expectation in your “property settlement agreement” (PSA), also called a “marital settlement agreement” (MSA). If you don’t label your obligations with enough specificity, you could be stuck paying for education costs from your personal assets, even though the child has enough money in her name to cover these expenses.

What’s more, in most states, a kid’s custodial accounts will affect her ability to qualify for financial aid. So, not only will you be unable to use her funds to defray college costs, overall, you’ll owe more to the school due to her failure to qualify for maximum aid. Therefore, it’s always best to make sure everyone knows what’s at stake and what funds will be earmarked for which expenses. Giving yourself a well defined duty when you divorce is smart. You can always choose to spend more when the time comes, depending upon future circumstances (not only your finances; but also, the quality and tone of your filial relations).

Actually, the decision to contribute toward your child’s college education might not be yours to make after all. If you happen to divorce under the laws of Alabama, Connecticut, the District of Columbia, Hawaii, Illinois, Indiana, Iowa, Massachusetts, Mississippi, Missouri, New Hampshire, New Jersey, New York, North Dakota, Oregon, South Carolina, Utah or Washington, you could be ordered to pay for some or all of your child’s college expenses.

The courts in these few states have repeatedly upheld the constitutionality of their laws providing for college contribution because they view children of divorce (or whose parents are court-ordered to support them) as disadvantaged, lacking the financial benefits of kids from intact families. In legalese, children from fractured families constitute a “special class” such that these college contribution laws are “reasonably related” to a legitimate government purpose--ensuring the continued education of its youngest, identifiably more vulnerable, citizens. When Connecticut changed its law in 2002, legislators cited figures to prove the point: “Children of divorced families were 59% less likely to receive support from parents for college and 23% less likely to attend college at all than children of intact families.” (See: Educational Support Orders In Connecticut.)

If your kids are too young for the college issue to be resolved when you divorce, the court will leave the matter open, allowing the parties to settle the issue among themselves when the matter is ripe, or apply to the court for a full hearing. Before rendering a final decision on who pays how much for what, nearly every state court will consider the particulars of each case, i.e., both parents’ ability to pay; the child’s ability to contribute (with assets, work-study programs, merit or need-based scholarships, Pell grants, Stafford loans and financial aid); as well as her aptitude and diligence for the requested course of study.

And by the way, just because you might not be ordered to contribute toward your kid’s college costs doesn't mean that you are immune from an order to pay for her private primary or secondary school, regardless of where you live. Why? All parents, everywhere in the U.S., are obligated to support their children through their age of majority, generally from 18 to 21 years old. So, even if you live and divorce in a state like Ohio, which will not compel you to cover college costs, you might be ordered to pay for private or parochial school through high school, if it’s best for the child and the custodial parent has the power to make that kind of decision. See for yourself.

Also, don’t rely upon those custodial accounts to defray any of these pre-college, private school costs. Most courts have held that the duty to pay primary and secondary tuition and related expenses are the parents’--not the child’s--responsibility, and as such, should not be paid from the child’s custodial, i.e., UGTA or UTMA, accounts. (The IRS might allow you to use them; but your ex can haul you into court for doing so.)

Finally, assuming you meet the “support test”--check I.R.C. § 152(e)--figure out how to maximize the post-divorce cash remaining in both your and your ex’s pockets by calculating who best benefits (given all the different phase out levels) from claiming the kids as dependents and the tax advantages that follow: i.e., the Child Tax Credit, the Hope Scholarship Credit and the Lifetime Learning Credit. If you decide that the noncustodial parent (NCP) should be entitled to claim one or more of the kids as a dependent, make sure that I.R.S. Form 8332 is completed and signed by the appropriate party at the time of the divorce and given to the NCP for attachment to his or her future income tax returns.

In the meantime, make sure you consult with an attorney to confirm the law in your jurisdiction. Then, knowing what you must, or should, do for your kids, crank up those 529 plans and don’t forget to give your child an apple for the teacher. (For additional information on planning for college, click here.)

Written by Marlene M. Browne Esq.

From San Francisco Family Law Blog posted 2007-02-12.