Kim Finkle, MBA, Staff Financial Advisor Having a conflict with your co-parent or partner? - Start Neutral Mediation

Massachusetts 529 College Savings Plan: A Boon for Co-parents

The Massachusetts 529 College Savings Plan, like most state-sponsored 529 plans, is a tax-advantaged college savings account. Contributions grow tax-free, and qualified withdrawals used for educational expenses are not taxed by the state. Here's why the MESP is ideal for co-parents:

• No Residency Requirement to Contribute: Both parents can contribute regardless of where they live in the U.S.
• Nationwide Flexibility: Funds can be used at any accredited educational institution, in-state or out-of-state, giving your child maximum college choice.
• Multiple Contribution Options: Each parent can contribute according to their financial situation, as agreed upon in court orders or separate agreements.

 

Managing a Massachusetts 529 College Savings Plan as Co-parents

There are two main ways divorced or separated parents can manage an MESP for their child:

• Separate Accounts: Each parent can open their own MESP naming the child as the beneficiary. This allows for independent control over contributions and withdrawals.
• Joint Ownership Not Available: Unlike some states, Massachusetts doesn't allow joint ownership of 529 plans. However, one parent can be the account owner while the other contributes.

 

Important Considerations for Co-parents

• Open Communication is Key: Discuss contribution amounts, investment strategies, and beneficiary designations openly with your co-parent to avoid future disputes.
• Legal Agreements: Consider including specific details about the 529 plan in your divorce decree or a separate agreement for clarity.
• Tax Implications: Be aware of tax implications for contributions and withdrawals, especially if one parent contributes more than the other. Consulting a financial advisor can be helpful.

 

MESP vs. Other States' 529 Plans

While the MESP offers significant benefits, comparing it with plans from other states, especially if your child might attend college out-of-state, is prudent. Here's a quick comparison of Massachusetts with 5 other popular 529 plans:

State	Investment Options	State Tax Benefit	Additional Benefits
Massachusetts	Variety of Options	Up to $3,000 deduction	None
Maine (Neighboring State)	Vanguard Target-Date Funds	Up to $5,000 tax credit	None
Rhode Island (Neighboring State)	Fidelity Freedom Funds	Up to $7,000 deduction	None
California	Multiple Portfolio Options	Up to $2,500 tax credit	Can be used for private K-12 tuition
Texas	T-Rowe Price Funds	No state tax benefit	Can be used for private K-12 tuition up to $10,000/year

 

Alternatives to 529 Plans

While 529 plans offer tax advantages, they may not be the only option for divorced or separated parents saving for their child's education. Here are a few alternatives to consider:

• Custodial Savings Accounts (UTMA/UGMA): These accounts allow you to invest on a minor's behalf, but funds can be used for any purpose, not just education. Earnings may be taxed.
• Savings Accounts: A regular savings account won't offer tax benefits, but it can be a good option for short-term savings goals.

 

Conclusion

The Massachusetts 529 College Savings Plan empowers divorced or separated parents to build a secure future for their child's education. By understanding the plan's features, comparing it with other options, and considering alternative savings vehicles, you can ensure your child has the financial means to pursue their educational dreams.

Remember, consulting with a financial advisor can help you develop a personalized college savings plan tailored to your specific needs and goals.

 

 

529 Plans By State

1. Alaska 529 Plan

2. Alabama 529 Plan

3. Arizona 529 Plan

4. Arkansas 529 Plan

5. California 529 Plan

6. Colorado 529 Plan

7. Connecticut 529 Plan

8. Delaware 529 Plan

9. Florida 529 Plan

10. Georgia 529 Plan

11. Hawaii 529 Plan

12. Idaho 529 Plan

13. Illinois 529 Plan

14. Indiana 529 Plan

15. Iowa 529 Plan

16. Kansas 529 Plan

17. Kentucky 529 Plan

18. Louisiana 529 Plan

19. Maine 529 Plan

20. Maryland 529 Plan

21. Massachusetts 529 Plan

22. Michigan 529 Plan

23. Minnesota 529 Plan

24. Mississippi 529 Plan

25. Missouri 529 Plan

26. Montana 529 Plan

27. Nebraska 529 Plan

28. Nevada 529 Plan

29. New Hampshire 529 Plan

30. New Jersey 529 Plan

31. New Mexico 529 Plan

32. New York 529 Plan

33. North Carolina 529 Plan

34. North Dakota 529 Plan

35. Ohio 529 Plan

36. Oklahoma 529 Plan

37. Oregon 529 Plan

38. Pennsylvania 529 Plan

39. Rhode Island 529 Plan

40. South Carolina 529 Plan

41. South Dakota 529 Plan

42. Tennessee 529 Plan

43. Texas 529 Plan

44. Utah 529 Plan

45. Vermont 529 Plan

46. Virginia 529 Plan

47. Washington 529 Plan

48. West Virginia 529 Plan

49. Wisconsin 529 Plan

50. Wyoming 529 Plan

51. DC 529 Plan

Warning:  This post is neither financial, health, legal, or personal advice nor a substitute for the advice offered by a professional. These are serious matters, and the help of a professional is recommended as it can impact your future.