Florida couples contemplating a divorce might be interested to learn that they should not put off dividing up their retirement assets. Although sometimes couples are eager to hurry up and get the divorce process over so they can begin to move on with their lives, there are some easily overlooked issues that could prove to be quite important. Financial advisors say that splitting up retirement assets is an issue that couples should ensure they take care of during their divorce proceedings, or they may regret it later on.
There are potential pitfalls to dividing up retirement assets. Perhaps the biggest one is the issue of taxation. When a transfer of the entire interest in an individual retirement account is contemplated, it can usually be done by simply changing the name on the account. However, if the funds in the IRA account are going to be divided up between spouses, then the amount that is to be transferred should be put into the other person’s existing IRA account or a new IRA account. In a complex asset divorce, taxes can be avoided if the money is transferred from one IRA to another in the appropriate manner.
One way that couples can ensure that retirement assets are divided appropriately is through the use of qualified domestic relations orders, which divide retirement assets related to workplace plans based upon agreed-upon percentages. Therefore, if the market falls out, one spouse is not left with nothing.
An attorney with experience in divorce matters may be able to provide advice and counsel to a person involved in a divorce, including on property settlements. Such an attorney may also be able to advise on such related matters as asset valuation.
Source: Fox Business, “How to Split up Retirement Assets in a Divorce”, Marilyn Bowden, September 16, 2013