Navigate:

Allocating Funds During Divorce and Separation

There may be opportunities to create special assets that are likely to ride out the divorce storms and help you later. For example, you might have put savings or a specific asset aside for your children’s college education. Set up a trust to protect the savings so these community dollars go to the children’s education, not enhanced lifestyles and attorneys’ fees during the divorce wars. There’s no need for overkill. A trust can be as simple as a bank account with you or you and your spouse as trustee(s) for your children. If there is a large amount involved or an asset you intend to use for their education, have your attorney prepare a trust document.

You may want to set up or retain retirement accounts, if you have the opportunity, to ensure that at least these funds are around when the smoke clears. For example, IRA’s are usually awarded to the spouse whose name is on the account. They have been created from community property, so they will go in that spouse’s "column" in an equal distribution of the community property. Some IRA’s are pre-tax dollars; if pre-tax, they should not be cashed in until retirement, unless circumstances justify triggering the tax bite of a penalty plus your regular income tax.