Protecting Assets in the Event of Divorce

After eight years of marriage, a Colorado woman filed for divorce. When the judge divided the couple’s property, one account was treated like all the others: an investment account labeled “UGMA_UTMA,” holding $132,950 for their only child. The judge split the balance equally between the two parents.

The father had asked for something different: hold the account for the child until age 18, allow no withdrawals without a court order, and let both parents only add money. In October 2024, the Colorado Court of Appeals reversed the split in In re Marriage of Nevedrova. An account created under the state’s Uniform Transfers to Minors Act belongs to the child, the court held, so it can’t be marital property. But a label on the father’s statements didn’t prove the account had been created that way, so the court sent the case back for the trial court to find out, and to redo the property division, spousal maintenance, and child support if the money turned out to be the child’s.

That case turns on the question at the center of every divorce involving a child’s savings: who legally owns the account? The answer is different for a custodial account, a 529 plan, and money you’ve set aside in your own name, and it decides whether a judge can divide the money, who controls it afterward, and how easily it could be drained. This guide walks through each kind of account, what to do while a divorce is underway, and the settlement terms that protect your child’s savings for the long run. It’s part of our section on legal protections, which starts with The Ultimate Guide to Legalities for Custodial Accounts.

Why ownership decides everything

A divorce court divides the spouses’ property. Your child’s savings are part of that only if the money legally belongs to one or both of you, and that depends on how each account is titled, not on what the money was meant for. Here’s how the common accounts for children compare.

General rules drawn from the court decisions and plan rules in this guide. State law varies, and a court will look at how each account was actually set up.

The pattern is simple. If your child owns the account, it generally stays out of the property division, though the adult managing it still answers for how it’s handled. If a parent owns it, a court can treat it like any other asset, even when every dollar was meant for your child. The rest of this guide explains why, starting with custodial accounts.

Custodial accounts: your child’s property

Money deposited into a custodial account under the Uniform Transfers to Minors Act (UTMA), or under the older Uniform Gifts to Minors Act (UGMA), is an irrevocable gift. The property is indefeasibly vested in the child, meaning the child’s ownership can’t be undone, while an adult custodian manages it until an age set by state law. That’s how the model act reads, along with the Uniform Law Commission’s official comments, as South Carolina enacted it in 2022. UTMA vs. UGMA: What’s the Difference? explains how the two laws compare.

Because the money is the child’s, it isn’t the parents’ to divide. The Nevedrova court built on earlier Colorado decisions that treated custodial money as the child’s, and on rulings from courts in Ohio, Missouri, North Carolina, and Indiana that a custodial account isn’t marital property. If the account qualifies, a judge can’t split it and has to work out the rest of the property division without it.

The paperwork is the proof

The Colorado case also shows where this protection is weakest. Under Colorado’s act, money becomes custodial property when it’s delivered to a brokerage or bank for an account in the custodian’s name, followed by words to the effect of “as custodian for [child’s name] under the Colorado Uniform Transfers to Minors Act.” The father’s statements labeled the account “UGMA_UTMA,” but nothing in the record showed he had deposited the money with that declaration, so the appeals court couldn’t tell whether the account had been created under the law at all.

Two other details from the case are worth remembering. The wife argued that her husband had moved marital money into the account after she filed for divorce, a dispute the appeals court left for the trial court to sort out. And while the father had asked the court to hold the money until the child turned 18, a Colorado custodial account doesn’t hand over until 21, the court noted. The handoff age comes from state law, not from the divorce.

So pull the opening documents for every custodial account now, before anyone needs them. What Happens at the Age of Majority? covers what happens when your child takes over.

Who stays in charge of a custodial account

A divorce doesn’t change who manages a custodial account. Each account has exactly one custodian, and the act doesn’t allow two. The Uniform Law Commission kept that rule in its 2026 update to the act, citing the disputes two custodians could have over investments or withdrawals and the problems a later divorce would cause, according to the American Bar Association’s Probate & Property magazine.

The custodian changes only if they resign and a successor takes over, or a court removes them, and which court can do that varies by state. In Nevedrova, the appeals court pointed to a 2005 Colorado decision holding that a divorce court lacked the power to remove a father as custodian of his child’s account; that question belonged in a separate civil case. In a civil case decided by Colorado’s Supreme Court in 1989, a trial court that found a father had breached his duties as custodian replaced him with the mother.

Other courts have dealt with custodial accounts within the divorce itself. In In re Marriage of Rosenfeld, a 2003 divorce case, the Supreme Court of Iowa ordered a father who had put $40,000 from his daughter’s called bonds into his own checking account to pay $51,692.85 into a new custodial account for her, and he lost his role as custodian of that account. Ask a lawyer in your state which court can act.

The other parent’s rights

If your former spouse is the custodian, you aren’t shut out. Under the model act, the custodian must keep records of every transaction and make them available at reasonable intervals to a parent or the child’s legal representative, and to the child from age 14. An adult member of the child’s family, the child at 14 or older, or anyone who gave to the account can ask a court to order an accounting, and many of the same people can ask a court to remove a custodian for cause.

Those rights matter most once money starts flowing out. Custodial money can pay for extras that benefit your child, not basics a parent owes, and courts have been especially firm about one temptation in separated families: using the child’s account to cover child support.

• In Wagman v. Wagman, a New York mother had reimbursed herself from her son’s custodial accounts for child support his father didn’t pay. In 2007 the court ordered her to repay that $32,666, part of a $116,976.76 judgment for her son.
• In Carlson v. Wells, decided in 2011, the Supreme Court of Virginia faulted a divorced father who, among other breaches, reimbursed himself out of his children’s money for a child support payment. He and an uncle who managed other accounts were ordered to pay the three children $43,910.88 in damages, plus $33,102.03 in fees and costs.

The 2026 update to the act would state outright that a custodian can’t use the account to meet their own legal duty to support the child, the ABA reports. The Ultimate Guide to Legalities for Custodial Accounts covers what custodial money can and can’t pay for, with more court rulings.

529 plans: usually the owner’s property

A 529 plan works differently. It has an owner, usually a parent, and a beneficiary, your child, and the owner keeps control. The owner can switch the beneficiary to another member of the child’s family without income tax consequences, and under IRS rules that family includes a stepbrother or stepsister and the child’s own father or mother, according to the definition Illinois’s Bright Start plan reprints from IRS Publication 970. The owner can also withdraw the money for other purposes, though the earnings are then taxed as income and may face a 10% penalty, Fidelity notes.

Nothing stops an owner from emptying the account, Mark Kantrowitz warns at Saving for College. And 529 plans generally allow only one owner, so two parents can’t hold one jointly, the Pennsylvania law firm High Swartz explains.

That control is why courts often treat a 529 as the owner’s property. In Berens v. Berens, decided in 2018, the North Carolina Court of Appeals took up the question for the first time. A couple with six children had opened 529 plans for several of them during the marriage, funded with the husband’s earnings and owned by the wife. She argued the money was a gift to the children and should be left out of the property division. The court disagreed. The children had no ownership or control, and the parents could spend the money elsewhere; they could, the court wrote, withdraw it all, pay a tax penalty, and buy a vacation home. Absent some further step by the parents to restrict the money, it belonged to them, so it was marital property. The trial court had awarded her about 57% of the marital estate, including the home and the 529 plans.

The court acknowledged the risk in that answer: the spouse who receives the 529 plans in the property division might be forced to spend them on something other than the children’s education. Its response was that trial judges can, and should, use their broad discretion over how property is divided to minimize that risk. Results vary by court, Kantrowitz notes. Some judges treat a 529 as money set aside for the child and leave it out of the division, while others might require the owner to pay the other parent half its value.

North Carolina shows how much the title matters. In 2002, as the Colorado court noted, North Carolina’s Court of Appeals observed that a trial court had improperly treated accounts the children owned under the state’s UTMA as marital property. Sixteen years later, the same court held that 529 plans the parents owned were marital property. Same state, same goal of saving for the children, opposite results, because of whose name was on the account. The Complete Guide to 529 College Savings Plans explains how 529 ownership works.

A Kansas case that turned on a few words

When a 529 comes through a divorce intact, the settlement agreement decides how it’s used. Emmanuel Daon and Maria Stewart opened 529 plans for their two sons during their marriage, with Daon as the owner of their older son Alexander’s account. Their 2012 divorce agreement said the accounts were held in constructive trust for the children, with both parents distributing the money as they agreed was in the children’s best interests “until such time as the funds belong to the children.” Neither parent could withdraw anything without the other’s written consent, and a parent who did would owe the other half of the amount withdrawn, plus all the taxes.

In 2020, Alexander turned 18 and was admitted to Kansas State University’s engineering program, estimated to cost $27,870 a year. His account held $96,098.48 as of March 31, 2021. Daon refused to release any of it, saying he was uncomfortable because Alexander hadn’t involved him in planning for college, and a trial judge sided with him, concerned about turning over that much money to a young man. In August 2022 the Kansas Court of Appeals reversed in In re Marriage of Daon. Reading the parents’ own words, it held that the money was to be turned over to Alexander when he reached Kansas’s age of majority, 18, and it ordered Daon to pay $15,840 of Stewart’s attorney fees for the appeal.

The clause did its main job: for years, neither parent could drain the account, and the court noted that each effectively held a veto over withdrawals, even for Alexander’s education. But its wording also handed the money to an 18-year-old, an outcome the account’s owner had argued against. The parents could have chosen 21, 25, or later, the court observed, but they didn’t say so. If you want the money spent only on school, or held longer, your agreement has to say exactly that.

The successor owner matters too

A 529 owner can usually name a successor owner to take over if the owner dies, and that choice can be changed without anyone else noticing. In a Kansas divorce that reached the state’s Court of Appeals in 2023, In re Marriage of Obembe, the father owned the 529 accounts for the couple’s three daughters. Roughly two months after the divorce decree, the mother asked the court to enforce their agreement: the father had moved her from successor owner to secondary successor and named his brother first. The parents settled it after a hearing. The father stayed the owner, removed his brother, and restored the mother, and each agreed that if they inherited the accounts, they would name a successor the other parent chose. Naming Successor Custodians covers how to set up successors for custodial accounts and 529 plans.

While the divorce is underway

The months between filing and a final decree are when savings are most exposed. Accounts are still in one parent’s control, emotions run high, and money can move before anyone has agreed on anything. California builds a safeguard into every divorce: the summons itself contains orders restraining both spouses from transferring, concealing, or otherwise disposing of property without the other’s written consent or a court order, except in the usual course of business or for the necessities of life, under Section 2040 of the state’s Family Code. Ask your lawyer whether your state has similar automatic orders, or whether to request a temporary order that covers your child’s accounts.

Whatever your state’s rules, these steps protect your child’s savings while the case is open:

• List every account held for your children, with its owner or custodian, its beneficiary, and where the money came from, including gifts from grandparents.
• Collect the opening documents for each custodial account, showing it was titled to a custodian for your child under your state’s act.
• Save recent statements for every account, and keep copies somewhere your spouse can’t delete them.
• Don’t withdraw money, change a beneficiary, or change a successor on any child’s account without your spouse’s written agreement or a court order.
• Don’t move household money into a child’s account while the case is open unless your spouse agrees in writing. A deposit timed to a divorce can look like an attempt to put marital money out of reach, which is exactly what the wife in Nevedrova alleged.
• Never use a child’s custodial account for legal fees, household bills, or support you owe.
• Tell your lawyer about every account, and say which ones you believe belong to your child.

Settlement terms that protect your child’s savings

For a 529, the settlement agreement is where the real protection happens, because a court order can limit what an owner would otherwise be free to do. Courts enforce these terms as written, as the Kansas cases show, so the words matter. When one parent doesn’t trust the other, Kantrowitz suggests transferring ownership of the 529 or writing restrictions on how it can be used into the divorce decree, and he notes that every state’s 529 plan allows the owner to be changed in a divorce. The table lists the terms worth spelling out.

Work out the exact wording with a family law attorney in your state.

A custodial account’s handoff age is set by state law, but a 529 has no handoff date unless your agreement creates one, as the Kansas parents’ agreement did. Decide on purpose whether your child should ever own the 529 outright, and when.

Who should own the 529 after the divorce?

When a 529 comes through the divorce intact, choosing its owner means weighing control against financial aid. When parents are divorced and live apart, only one files the FAFSA: the parent who provides more financial support, regardless of which parent your child lives with more, Kantrowitz explains. If that parent has remarried, the stepparent’s income and assets go on the form too, regardless of any prenuptial agreement.

Ownership then decides how a 529 counts. One owned by the parent who files is reported as a parent asset, which reduces aid eligibility by at most 5.64% of its value. One owned by the other parent isn’t reported at all, and its withdrawals don’t count as income to your child. A custodial 529, which your child owns, counts as a parent asset for a dependent student, FinAid explains, while a UTMA or UGMA account is reported as your child’s own asset, assessed at up to 20%, according to Chase. Here’s what that could mean for a $30,000 account.

• Counted as your child’s asset (up to 20%)
• Counted as a parent’s asset (up to 5.64%)

Hypothetical maximums for a dependent student’s FAFSA, using the federal formula’s top assessment rates: 20% of the student’s assets and 5.64% of the filing parent’s. Actual effects depend on the rest of a family’s finances, and colleges’ own aid forms, such as the CSS Profile, can count accounts differently. The filing parent is the one who provides more financial support.

See the numbers

A $30,000 account on one FAFSA, by who owns it

Who owns the account	How the FAFSA counts it	Most it could reduce aid
UTMA or UGMA account	Your child’s asset, up to 20%	$6,000
Custodial 529	A parent asset, up to 5.64%	$1,692
529 owned by the filing parent	A parent asset, up to 5.64%	$1,692
529 owned by the other parent	Not reported	$0

On paper, ownership by the parent who doesn’t file looks best, and Kantrowitz says keeping the 529 with the parent who provides less support may be advantageous. There are two catches. First, ownership is control. The owner decides when and how the money is spent unless your agreement limits that, so a smaller FAFSA footprint isn’t worth much if you can’t trust that parent with the account. Second, the FAFSA isn’t the only form. Some colleges that use the CSS Profile require both of a student’s parents to complete separate applications, according to the College Board, so a 529 the other parent owns may still count there. How 529s and UTMAs Impact the FAFSA covers the formulas in more detail.

If the parent who owns the 529 remarries, Kantrowitz recommends a prenuptial agreement stating that existing 529 plans stay with their owners. Otherwise, a second divorce could put them up for division.

Roth IRAs, Trump Accounts, trusts, and your own accounts

A custodial Roth IRA belongs to your child, with a custodian managing it until a required age, typically 18 or 21 depending on the state, Fidelity explains. Like other custodial property, it’s your child’s, not part of either parent’s share. The Custodial Roth IRA covers how it works.

A Trump Account is owned by the child, while a parent or guardian acts for them until 18, and withdrawals generally aren’t allowed before then, Fidelity explains. That makes it one of the hardest accounts for anyone to drain during a divorce. The 530A Trump Account Explained has the details.

A trust follows its own terms. If you want a trustee other than either parent, payouts in stages, or rules a custodial account can’t offer, a trust can provide them. Understanding Trust Funds for the Middle Class explains when one makes sense.

Money in your own name, such as a savings or brokerage account you’ve set aside for the kids in your head, is legally yours. The North Carolina court’s reasoning about 529 plans applies with even more force here: if a parent can spend it, a court can divide it. Custodial Brokerage Accounts vs. Parent-Owned Taxable Accounts weighs control against ownership.

A 529 owned by a grandparent isn’t either parent’s property, so it stays out of their property division entirely. For families worried about a divorce, a grandparent’s account can be a steady home for the extended family’s gifts, and Discussing Wealth with Grandparents can help with that conversation.

After the divorce

A final decree isn’t the end of the job. A few habits keep the protections working for years:

• Follow the agreement to the letter. Send statements on schedule, get written consent where it’s required, and keep copies of both.
• Spend custodial money carefully. If you’re the custodian, pay for extras that benefit your child directly from the account at the time of the expense, and keep records your child can review from age 14.
• Update designations. Recheck successor custodians and successor owners, especially when either parent remarries.
• Keep gift records. Note who gave what, and when, to each child’s accounts.
• Revisit before college. A year or two before your child applies, check who will file the FAFSA, which accounts count, and what your agreement says about paying for school.
• Plan the handoff. A custodial account goes to your child at the age your state sets, and The “Wealth Transfer” Conversation can help you prepare them.

How GoodNest fits

GoodNest is built for the giving side of your child’s savings. Family and friends give from your child’s GoodNest page, often alongside a small keepsake like a book. GoodNest doesn’t hold or invest the money, and it isn’t a custodian or a 529 plan. Gifts go straight to you by Zelle, Venmo, or PayPal, and you move each gift into the account it’s meant for. Whether or not divorce is ever part of your story, three habits keep those gifts protected:

• Deposit promptly. Until a gift reaches your child’s account, it’s sitting in yours, mixed with money a court could divide.
• Choose the account on purpose. A gift deposited into a custodial account becomes your child’s property, while a gift added to a 529 you own becomes part of an account you control.
• Keep the gift record. A record of who gave what, and when, shows which money came from relatives for your child if anyone ever asks how an account was funded. Your child’s GoodNest page writes down each gift sent from it, with who sent it, how much, and when, and you can record each move into your child’s account there too.

Building Your Village covers how to welcome gifts from family and friends.

The bottom line

In a divorce, your child’s savings are only as safe as their legal title. A custodial account already belongs to your child, so the work is proving it and keeping the custodian accountable. A 529 belongs to its owner, so the work is a settlement agreement that says, in plain words, who controls the money, what it’s for, and when, if ever, it becomes your child’s. Get both right, and the money you and your family set aside will still be there when your child needs it. For the rules that govern custodial accounts in every situation, return to The Ultimate Guide to Legalities for Custodial Accounts.

Frequently asked questions

Is a 529 plan marital property in a divorce?

Often, yes. A 529 usually belongs to the parent named as owner, and the child is only the beneficiary, so many courts treat it like other property acquired during the marriage. North Carolina’s Court of Appeals held exactly that in 2018. Some courts set a 529 aside for the child instead, and a settlement agreement can restrict how the money is used.

Can a divorce court divide a UTMA or UGMA account?

Generally not. Courts in Colorado, Ohio, Missouri, North Carolina, and Indiana have treated a properly created custodial account as the child’s property, not marital property. A court may want proof that the account was opened with the custodial wording your state’s law requires, so keep the paperwork.

Can my ex take money out of our child’s custodial account?

Only if your former spouse is the custodian, and only to spend on your child, for extras beyond the basic support parents owe. Using it for child support, or to repay themselves for expenses paid years earlier, isn’t allowed, and courts have ordered parents to repay such withdrawals. You can ask to see the account’s records, and you can ask a court for an accounting or to remove the custodian for cause.

Can both parents be custodians, or co-own a 529, after a divorce?

No. A custodial account has exactly one custodian, and a 529 plan generally has one owner. Instead, use your settlement agreement to require both parents’ written consent for withdrawals, statements for the parent who isn’t in charge, and a named successor.

Which parent reports a 529 on the FAFSA after a divorce?

Only the parent who provides more financial support files the FAFSA. A 529 that parent owns counts as a parent asset, reducing aid eligibility by at most 5.64% of its value, while a 529 owned by the other parent isn’t reported. Some colleges that use the CSS Profile also ask the other parent for information.

Sources

• Colorado Court of Appeals, In re Marriage of Nevedrova, 2024 COA 112 (October 10, 2024).
• South Carolina General Assembly, 2021-2022 Bill 3821, South Carolina Uniform Transfers to Minors Act (Act No. 128, signed April 4, 2022), which reprints the Uniform Law Commission’s official comments.
• Benjamin Orzeske, “Uniform Laws Update: The New Uniform Transfers to Minors Act”, Probate & Property, American Bar Association (September/October 2026).
• Supreme Court of Iowa, In re Marriage of Rosenfeld (September 4, 2003), via FindLaw.
• Supreme Court of New York, Westchester County, Wagman v. Wagman, 2007 NY Slip Op 52388(U) (December 5, 2007), New York State Law Reporting Bureau.
• Supreme Court of Virginia, Carlson v. Wells (January 13, 2011), via FindLaw.
• Bright Start College Savings, Change of Designated Beneficiary form, which reprints the IRS Publication 970 definition of a member of the beneficiary’s family (accessed October 2, 2026).
• Fidelity Investments, 529 plan overview and disclosures (accessed October 2, 2026).
• Mark Kantrowitz, “Divorce can Derail College Savings”, Saving for College (August 10, 2023).
• High Swartz, “529 College Savings Plan and Divorce in Pennsylvania” (accessed October 2, 2026).
• North Carolina Court of Appeals, Berens v. Berens, 260 N.C. App. 467, 818 S.E.2d 155 (August 7, 2018), via the Caselaw Access Project.
• Kansas Court of Appeals, In re Marriage of Daon, No. 124,487 (August 12, 2022), unpublished memorandum opinion.
• Kansas Court of Appeals, In re Marriage of Obembe, No. 124,097 (February 3, 2023), unpublished memorandum opinion.
• California Family Code § 2040, orders included in the divorce summons, via FindLaw (accessed October 2, 2026).
• FinAid, “UGMA & UTMA Custodial Accounts” (accessed October 2, 2026).
• Chase, “Can a custodial account affect financial aid eligibility?” (accessed October 2, 2026).
• College Board, “How do I know if CSS Profile is required from both of my biological/adoptive parents if they are divorced/separated?” (accessed October 2, 2026).
• Fidelity Investments, “Turbocharge your child’s retirement with a Roth IRA for Kids” (accessed October 2, 2026).
• Fidelity Investments, Trump Accounts guide, Fidelity Learning Center (accessed October 2, 2026).

This article is for general educational purposes only and is not legal, tax, or financial aid advice. Divorce and property law vary by state, and each court decision described here applied its own state’s law to its own facts, so treat the cases as examples rather than predictions of how a court would rule for your family. The chart is a hypothetical example using the federal formula’s top assessment rates for a dependent student and is not an estimate of any family’s aid. Rules are current as of 2026 and change over time. Organizations and products named are examples, not endorsements. GoodNest does not provide legal, tax, or investment advice and does not hold or invest funds. For decisions about your family’s accounts, talk with a family law attorney in your state.