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PUTMA Accounts Versus 529 Accounts: Why it Matters in your Divorce

March 27, 2020

The recent Pennsylvania Superior Court case of Brooks v Brooks highlighted a common misunderstanding that can frustrate the intent of people who are divorcing.  The case revolved around one party using the 529 Accounts of both children to pay for the post-secondary education of one child.  The parties, when married created both PUTMA (Pennsylvania Uniform Transfers to Minors Act) accounts and 529 accounts.  The parties’ settlement agreement stated that husband would maintain all of these accounts and act in a fiduciary manner.  Wife was infuriated over what husband did and brought suit only to learn a harsh lesson about the nature of the accounts.

A PUTMA account is not marital property – it is the property of the minor to whom the property is transferred.  A 529 account is marital property, but it is technically controlled by whomever is the account owner – which can only be a single person (an individual) under federal law.  So, the wife lost her case.

A lesson here is that a well-drafted settlement agreement is CRITICAL in a divorce case and that it is important to understand the exact nature of how these accounts are created to avoid an outcome that frustrates the intent of the settlement.

For more information, call the legal team at Eckell Sparks at 610-565-3701 or contact us online.