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Preserving your retirement through a divorce

In addition to a home, retirement accounts are often some of the largest assets to be split in property division divorce cases.
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    January 11, 2014 /24-7PressRelease/ -- Preserving your retirement through a divorce

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Texas residents that may be considering divorce or even be in the midst of a divorce have many factors to consider. The emotional upset of the loss of a marriage and intact family unit is of itself a huge issue. In addition, financial concerns can include child support, spousal support, ongoing living expenses, property division and more. The need to guard one's current and future earnings and assets is as important in a divorceas at any other time.

In addition to a home, retirement accounts are often some of the largest assets to be split in property division divorce cases. Simply agreeing upon a distribution is not the only concern in this matter. There are some very clear guidelines that should be heeded in order to prevent the loss of some of the value of the funds in question.

Always percentages, never dollars

When you and your partner are determining who will receive what in terms of retirement accounts, your cardinal rule should be that you discuss any splits in terms of the percentage of each account, never in terms of the dollar value. This is the only way to ensure that the ultimate distribution to each of you follows the spirit of your original agreement. Specifying dollar amounts could leave one party with a proportion much less than was originally intended.

To illustrate the point, if your IRA is worth $120,000 today and your spouse and you state that you will each take $60,000 when the divorce is final. If, on the day that you should each obtain your portion, the account is worth only $100,000, one of you may still be given the initial $60,000 while the other may receive only the remaining $40,000. Not only does one party receive $20,000 less than anticipated, but the equitable nature of the split has been lost.

While identifying the split "up front" as 50 percent to each spouse could not prevent the devaluation of the account, it could preserve the fair distribution to each party.

Plan transaction timing with care

Your divorce decree will have specific verbiage about how accounts are to be divided. However, you cannot rely upon this document alone to prevent having to pay taxes or penalties on your account funds. The timing of any distribution or transfer of money must happen at stated times per tax law or you will be faced with the loss of a good portion of your investment.

Make sure that you work carefully with your attorney and your tax advisor(s) to plan these and other critical steps during your divorce. Sometimes, these relatively simple acts can be overlooked and end up costing you tremendous money now and down the road.

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