Indiana Court of Appeals Rules on Post-Dissolution Domestic Relations Decree Concerning Ownership of “529 Accounts”

The Indiana Court of Appeals recently issued an opinion in a post-dissolution divorce case concerning the trial court’s post-dissolution decree that the husband’s pre-petition “529 accounts,” which are tax-advantaged college savings accounts authorized by 26 U.S.C. § 529, be combined with the wife’s separate “529 accounts” into a single, jointly owned 529 account for the benefit of the couple’s younger son. While the husband had contributed money to the accounts while the parties were still married, the parties’ dissolution agreement did not specifically address the husband’s “529 accounts,” which the Court of Appeals held were his property and were not being held “in trust” for the benefit of the couple’s children. Following dissolution, both husband and wife contributed money to their separately owned “529 accounts” for the benefit of their children.

Under Indiana law, trial courts are required to divide marital property in a just and reasonable manner, Ind. Code § 31-15-7-4, which is a matter within the sound discretion of the trial court, see Del Priore v. Del Priore, 65 N.E.3d 1065, 1072 (Ind. Ct. App. 2016). However, while a trial court “may set apart the part of the property of either parent or both parents that appears necessary and proper for the support of a child,” Ind. Code § 31-16-6-3, which is true even post-dissolution, see Thompson v. Thompson, 550 N.E.2d 1332, 1337 (Ind. Ct. App. 1990), the trial court in this case did not merely “set apart” property for the support of the parties’ children, but rather changed the ownership of that property making the husband and wife co-owners. As noted by the Indiana Court of Appeals, “[i]n dissolution proceedings, a trial court must finally dispose of all marital assets in one final judgment.” See Rohrer v. Rohrer, 734 N.E.2d 1077, 1082 (Ind. Ct. App. 2000).

In holding that the trial court lacked legal authority post-dissolution to make the wife a co-owner of the husband’s “529 accounts,” the Indiana Court of Appeals noted that the wife’s misfortunate could have been avoided had she specifically addressed the “529 accounts” at the time of dissolution by reaching an agreement with the husband or by raising the issue with the trial court. On remand, however, the Court of Appeals did remind the trial court, with respect to one of its rulings that was not included in the appeal, that the trial court had authority to “set apart” part of the husband’s property, including his “529 accounts,” for contribution to the college expenses of the couple’s other son, which were borne entirely by the mother on procedural grounds.

You can read the entire Indiana Court of Appeals’ opinion here:

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