Protect 529 Plans During Mayhem of Divorce

March 30, 2015

By Stephanie A. Henrick, Esq.

College savings plan

You have all heard the story:

“Boy meets girl. Boy and girl fall in love and get married. Boy and girl have a baby. Boy opens a 529 Plan to save for future college expenses of baby[1]. Boy, girl, family and friends make contributions to baby’s account[2]. Boy and girl have a fight. Girl files for divorce. Both forget to tell their lawyers about the 529 plan for baby. Divorce is finalized. Boy gets remarried to new girl. New girl threatens to leave boy unless he buys her a Porsche 911 Turbo. Boy does not have enough money. New girl finds a statement of boy’s 529 Plan. Afraid of going through another divorce, boy cashes out the 529 Plan and buys a Porsche. Baby applies for college and discovers there are no funds to pay for tuition. Baby takes out student loans, adding to the national $1.2 trillion in student debt[3]. “

Well maybe the story you heard was a little different, but this is reality. So how do you prevent this from happening?

Don’t Forget! 529 Plans are Marital Assets

Many people incorrectly assume that a 529 Plan belongs to the child. Even though the child is the beneficiary, the money does not belong to the child; it belongs to the account owner (usually a parent). The account owner has complete control of the assets and has the power to: withdraw all funds for any purpose, change the beneficiary, change the successor owner, name a new account owner, and revoke a previously authorized agent.

Options for Divorcing Parents Owning 529 Plans

Make sure the Property Settlement Agreement specifically addresses the 529 Plan account funds and the Plan Administrator receives an executed copy. There are a number of ways to protect these college savings funds.

1. Split the Existing Plan Between Parents

Splitting a 529 Plan into two separate accounts will give each parent complete control over half of the assets in his/her individual 529 Plan account, with child as beneficiary on both accounts.

2. Provide Restrictions on the Account in  the Property Settlement Agreement

The Property Settlement Agreement can restrict an owner’s powers on the 529 Plan account, such as: the inability to withdraw funds for non-qualified purposes; a limit on changing the beneficiary unless it is a sibling; designate the successor owner; limit investment options; give the age at which the beneficiary will become the owner; and state when withdrawals can be made.

3. Monitor the Account

Depending on the plan and state where the plan is held, parents may be able to monitor the use of the account by specifying that both parents need to be informed of any withdrawals.  Pennsylvania Plans have options allowing for an interested party to receive quarterly account statements in addition to the owner. This option should be designated on the Plan itself, as well as in the Property Settlement Agreement. The Agreement should direct the Plan Administrator to send copies of the statements to both parents.

4. Give Authority to Another Individual to Act on the Account

Another way to restrict usage of the funds is to execute a Limited Power of Attorney, authorizing the non-owner parent to act on the account. Again, this should also be set forth in the Property Settlement Agreement.

5. Transfer Ownership of the Account

An owner of a Pennsylvania 529 Plan has the ability to change the owner of the account. This could be to the other parent, a third party, or to the beneficiary.


The moral of the story: Divorce can result in financial pandemonium, but don’t forget that the purpose behind funding the 529 Plan account was to provide for your child’s education. Regardless of the outcome of the divorce, try to keep the funds intact for the benefit of your child.


[1] Only one account owner is permitted. The parent becomes the owner, naming the child as the beneficiary.
[2] Anyone (parents, grandparents, the child, relatives, friends, etc.) can make contributions to a child’s account up to the contribution limit ($452,210 currently in Pennsylvania). The contributions are made with after-tax dollars, the earnings are tax-deferred while remaining in the account, and the withdrawals are tax exempt when used for “qualified education expenses”.
[3] The Treasury Department has projected that annual tuition costs for college education will increase approximately 34% over the next twenty years. This means that for a private four year college, tuition alone (housing, books, meal plans not included) will cost roughly $88,000 a year and for an Ivy League school, approximately $126,000 a year.


The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.


What The Abercrombie Religious Discrimination Case Means For Your Business

By James B. Shrimp, Esq. March 25, 2015Employment 

Abercrombie & Fitch may not sell one-size fits all clothing, but it hopes later this spring that the United States Supreme Court will create a one-size fits all rule as to when an employer is on notice of a request for a religious accommodation.

Religious Accommodation Under Federal Law

Federal law requires that an employer accommodate an employee’s religious practices so long as the accommodation does not cause the employer an undue hardship in the conduct of its business.  These accommodations might include requesting certain days off from work, wearing certain attire or keeping a certain appearance (e.g., facial hair).  As with many employment issues, when and how an employee must request a religious accommodation is composed of fifty shades of gray (no not that Grey).  A case before the United States Supreme Court this spring will hopefully bring more clarity to when an employer is on notice that an employee is seeking a religious accommodation.

The Abercrombie Discrimination Case, Explained

In the case of Elauf v. Abercrombie & Fitch, a 17 year old female practicing Muslim applied for a job at an Abercrombie store in Oklahoma.  Ms. Elauf interviewed for the position and wore her hijab.  The hijab did not come up during the interview, but the assistant manager who interviewed Ms. Elauf, asked her superior whether Ms. Elauf could be hired given Abercrombie’s strict no headgear policy.  Appearance at the interview is an important element of Abercrombie’s hiring process, and Abercrombie chose not to hire Ms. Elauf.Ms. Elauf won her case at the trial court level and Abercrombie appealed.  Before the Tenth Circuit Court of Appeals, Abercrombie successfully argued that it could not have failed to accommodate Ms. Elauf for her religious beliefs, because Ms. Elauf never said she was wearing the hijab in practice of her Muslim faith.Ms. Elauf appealed and the United States Supreme Court will decide upon whom the burden falls in seeking a religious accommodation, the employer or the employee.  In other words, must the employee specifically state she is engaging in conduct or request a certain schedule because of religious beliefs, or is the employer on “notice” if the employer concludes a religious motive to the request.  Complicating the analysis is the fact that EEOC Guidance prohibits an employer from asking about a job applicant’s religious beliefs.

What the Supreme Court Might Do

Recently, the Supreme Court has leaned toward religious freedom in its decisions.  For instance, in the Hobby Lobby case, the Supreme Court permitted certain private, non-religious employers to refuse birth control coverage to employees on religious grounds, and in a decision last fall, Holt v. Hobbs, the Supreme Court permitted an inmate in Arkansas to grow a beard on religious grounds, even though the beard was against a Department of Corrections regulation.  However, a decision supporting Ms. Elauf would place a burden on employers that the Supreme Court has been hesitant to do in past employment decisions.The Abercrombie case was argued on February 25, 2015 and a decision is expected in May or June.For more information regarding the employment discrimination or employment law, please contact James B. Shrimp at 610-275-0700 or by email at jshrimp@highswartz.comThe information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation. 

Institute assembles team of ‘all-star researchers’ to cure hepatitis B

March 27, 2015By: John George, Philadelphia Business Journal Hepatitis BThe Baruch S. Blumberg Institute in Bucks County said this week it has recruited what it is calling a team of four “all-star researchers” who will focus exclusively on developing a cure for hepatitis B.Their goal is to find a cure within the next three years.The four principal scientists — Timothy Block, Drs. Jinhong Chang, Ju Tao Guo and Ying-Hsiu Su— and 16 of their staff members and laboratory researchers have joined the institute full time in a move that nearly triples its research capacity.The recruitment effort has also created the largest concentration of nonprofit scientists who are working solely on hepatitis B and liver cancer in the United States.“By bringing leading researchers in the field together at its headquarters, the Hepatitis B Foundation through its research arm, the Baruch S. Blumberg Institute, is able to concentrate their joint efforts to finding new treatments and, ultimately, a cure,” said Joel Rosen, the foundation’s chairman. “In the 12 years that I have been a member of the foundation’s board of directors, I have never been more optimistic that a cure is within reach. It’s an exciting time for everyone involved.”Continue Reading 

The Importance of Setting Up a Business Correctly

March 15, 2015Setting Up A Business; High SwartzWhen starting a business, you have many important decisions to make. One of the most critical, however, is the legal structure (or entity) you choose for your company. This will have a significant impact on how much you pay in taxes, your personal liability for the company’s debts and how you are able to raise money.Continue reading “The Importance of Setting Up a Business Correctly”

HICPA Compliance and Unjust Enrichment Claim

By Kevin Cornish, Esq.March 11, 2015Construction Deal This is a follow up to the June 1, 2014 blog entitled Pennsylvania Supreme Court to Decide Whether HICPA Allows Recovery under a Theory of Unjust Enrichment.

HICPA does not preclude recovery on Unjust Enrichment Claim

The Pennsylvania Supreme Court issued its decision in the case of Shafer Electric & Construction v. Mantia, 96 A.3d 989 (2014). At issue before the Supreme Court was whether the Home Improvement Consumer Protection Act, 73 P.S. §§ 517.1-517.18, bars a contractor from recovery for unjust enrichment when the home improvement contract does not comply with HICPA requirements. The Superior Court held that HICPA does not preclude a non-compliant contractor from pursuing an unjust enrichment claim, and the Supreme Court affirmed. Unjust enrichment is an equitable doctrine allowing a party to recover on the basis of a quasi-contract, or contract implied in law, when one party is enriched unjustly at the expense of another.

The Supreme Court first recognized that HICPA only bars actions for breaches of express home improvement contracts when the contract does not comply with HICPA. The Supreme Court noted that an unjust enrichment claim does not sound purely in contract and that HICPA is silent as to quasi-contract actions, such as unjust enrichment.

The Supreme Court also noted that disallowing an unjust enrichment claim when HICPA requirements have not been satisfied would allow a homeowner to avoid payment for work performed even if the work was perfect.

The Supreme Court focused primarily on the language of HICPA. While HICPA specifically states that a contract which is not compliant with HICPA is invalid and unenforceable, the Supreme Court held that HICPA’s language does not discuss the preclusion of common law equitable remedies such as unjust enrichment. The Supreme Court noted that if the Pennsylvania General Assembly wanted to modify the right of non-compliant contractors to recover under unjust enrichment, it could have done so.

Due the Supreme Court’s decision, contractors who do not comply with HICPA are permitted to bring equitable causes of action, such as unjust enrichment. Likewise, homeowners cannot avoid payment for work performed by non-compliant contractors on the sole basis that the contractor did not comply with HICPA.

Recoverable Damages

The procedural posture of Shafer Electric is also important. After the contractor brought suit against the homeowners, the homeowners filed preliminary objections to the action. Preliminary objections challenge the legal basis of a lawsuit based upon the facts alleged in the complaint, which are accepted to be true. The defendant does not have an opportunity to present its facts. In determining preliminary objections, courts assume all alleged facts to be true and determine whether the law allows for recovery.

Due to the procedural posture of the case, certain legal issues and defenses, in addition to the underlying facts of the case, were not litigated. For instance, under unjust enrichment, a plaintiff can only recover the reasonable value of services rendered. In a breach of contract action, a plaintiff could recover expectation damages, reliance damages, or restitution damages. Additionally, certain legal defenses are available to a defendant in an unjust enrichment action, such as the doctrine of unclean hands. Breach of contract actions may also implicate attorneys’ fee and interest recovery that are not available in an unjust enrichment action.

As a result of the Supreme Court’s decision, contractors who have not strictly complied with all aspects of HICPA are not precluded from bringing actions to recover money that has not been paid to them. However, a contractor’s damages may not be as expansive as those available in a breach of contract action. In order to assure the most options in the event of non-payment, contractors should comply with all aspects of HICPA and assure that written contracts are HICPA compliant.

The Supreme Court’s decision also means that homeowners cannot avoid payment to contractors based solely on a contractor’s failure to comply with HICPA. However, a homeowner may still have equitable defenses to a contractor’s claim of non-payment.

If you are a homeowner or home improvement contractor with questions regarding HICPA compliance and rights and responsibilities under HICPA, feel free to contact Kevin Cornish at 610-275-0700 or

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.