COA reverses order making ex-spouses co-owners of college savings account

An Indiana trial court erred when it ordered two divorced parents to become co-owners of the ex-husband’s 529 savings account in post-dissolution proceedings, finding the account was the man’s property, so the trial court lacked authority to make his ex-wife a co-owner.

In David K. Miller v. Joy A. (Miller) Brown, 03A01-1703-DR-512, David Miller opened two 529 college saving accounts in his name for his sons, Z.M. and N.M., with each son designated as beneficiary of one of the accounts. After Miller and his wife, Joy Brown, divorced in 2010, he continued contributing to the accounts, while Brown opened two new 529s in her name and designated each of her sons as beneficiaries of one of the accounts.

In June 2014, Brown filed a petition indicating Z.M. had started college and asking the Bartholomew Superior Court to order Miller to pay a share of the expenses. Miller objected, noting Z.M. was 19 and, thus, was emancipated when Brown filed her petition. While that petition was still pending, Brown filed a similar motion as to N.M., who had “plans” to attend college after his graduation.

At a subsequent hearing, Brown claimed she had paid up to $25,000 for Z.M.’s college, but that he had “failed” and dropped out. The trial court then dismissed Brown’s petition as to Z.M., agreeing with Miller that she had waited too long to file the petition because he was 19 years old at the time of the filing. The court also denied her request for reimbursements from Miller’s 529 account for Z.M.

Brown renewed her petition as to N.M. when he enrolled in college in the fall of 2016, testifying that Miller had not paid any portion of N.M.’s tuition. By the time of the second hearing, Brown had consolidated her 529s into a single account consisting of $11,400 for N.M., while Miller’s accounts held balances of $21,000 and $25,000, respectively.

After the second hearing, the trial court ordered the parties to consolidate the 529 funds into one account, with Miller and Brown as equal co-owners. All of N.M.’s college expenses were to be paid from that account, and any additional expenses were to be paid 55 percent by Brown and 45 percent by Miller.

Miller appealed, challenging only the portion of the trial court’s order that created a single, jointly owned 529 account. The Indiana Court of Appeals agreed that portion of the order was erroneous and reversed the trial court’s decision in a Friday opinion.

Chief Judge Nancy Vaidik, writing for the unanimous court, first noted that the two 529 accounts opened by Miller were legally Miller’s property, even though they were intended to benefit his sons. Further, Vaidik wrote the trial court’s order went against the meaning of Indiana Code 31-16-6-3, which holds that a court “may set apart the part of the property of either parent or both parents that appears necessary and proper for the support of the child.”

“But the trial court did not merely order part of Father’s property ‘set apart’ for the future support of Z.M. and N.M.,” the chief judge said. “Rather, it purported to make Mother a co-owner of Father’s property. The text of Section 31-16-6-3 does not authorize such a post-dissolution division of property.”

“But this is not the end of the line for Mother,” Vaidik continued. “While we are constrained to vacate the order requiring the parties to create a single, jointly owned 529 account, we must also remand this matter for a new ruling on Mother’s petition for payment of N.M.’s college expenses.”