How to protect your savings during a divorce

When any couple in Texas enters into a divorce process, the sheer number of topics to be discussed and managed can be overwhelming alone. The nature of those topics only adds to the emotional toll that a divorce can take on a person. Determinations of child custody, child support, spousal support, property division and more can be complex and are rarely simple.

Certainly protecting one's financial stability is important to ensure both current and future lifestyle and this includes any retirement savings that has been developed. Splitting retirement accounts can be a common part of many divorce settlements today and it is critical that any such actions are handled properly. Failure to do so can result in you watching a good portion of your savings be lost to penalties or taxes.

The best means of protection

When you must split up assets from pensions, retirement accounts or other such investments as part of your divorce, there is already a loss of how much you personally will receive. As such, you will want to take extra care to prevent even further, unnecessary loss. There are some ways to do this and, fortunately, they are relatively simple if you understand them and work with the right professional to execute them.

· Qualified Domestic Relations Order

Many financial transactions in a divorce require the use of a QDRO but you can use it even for those that do not require it and doing so is one of the easiest ways you can protect yourself.

The QDRO is your way of letting the IRS and any other entity know for sure that the transaction is, in fact, part of the divorce and not your means of taking retirement money early when you are not truly qualified. This then prevents the assessment of what can be steep taxes and penalties, losing a large portion of your account value.

· Smart division

When you are identifying how much of a particular account you will receive and how much your spouse will receive, you should always state the division in terms of the portion of the account, not the dollar figure. This maintains the intended ratio of split even in the face of potential value changes that can take place, preserving as much of your portion as possible.

· Watch dates

When you initiate certain financial transactions can matter greatly. For retirement account disbursements, if they are not done within the stipulated timeframes per the divorce, you can be faced with those taxes and penalties you tried so hard to avoid with the QDRO. Make sure that all such transactions are processed within or on the correct dates.

These are examples of how you can minimize the impact of what is already some loss of your investment. Working with an attorney who clearly understands these and other parameters is another very important thing for anyone in a divorce to protect themselves most fully.