Splitting retirement assets in divorce important
Posted on behalf of Michael D'Amico of D'Amico & Pettinicchi, LLC on Sep 19, 2013 in High Asset Divorce
Connecticut couples contemplating a divorce might be interested in what financial advisers have to say about the importance of splitting retirement assets. Many couples view dealing with retirement assets as a less pressing detail than issues such as child custody or determining how the split will affect each partner's lifestyle. However, financial advisers say dividing retirement assets is an important part of a divorce settlement because of the tax issues involved.
In a high asset divorce, taxes can be quite important. Coincidentally, financial planners say the most important factor in splitting retirement assets is taxes. The interest accrued on an IRA in one spouse's name can generally be divided, and a portion transferred to a spouse tax-free. However, it must be done in the correct way as outlined in the couple's agreement. If it is not done in the proper manner, the proceeds may become a fully taxable distribution of those retirement assets.
Financial advisers recommend consulting with a qualified tax specialist to make sure that all the details of the transfer are set up in the correct way, and contacting the institution that holds the IRA instrument to double-check that the information on the account and institution are accurate. Making mistakes in the transfer can result in losing up to half the value of the retirement account. Experts also advise individuals to keep good records because so many people have more than one retirement account.
A Connecticut lawyer with experience in divorce law may be able to help ensure everything is done properly in transferring any retirement assets. Moreover, such a lawyer could call in qualified professionals to give appraisals of property a couple owns and provide advice and counsel with respect to other issues that may arise .
Source: Fox Business, "How to Split up Retirement Assets in a Divorce", Marilyn Bowden, September 16, 2013