Couples in Washington State who are in the midst of or are considering ending their marriage in a divorce will have a lot to consider as the process moves forward. Amid all the emotional upheaval, it is easy to forget that there will be a life after the divorce. With that comes a need to support oneself and prepare for the future. Property division and protection of assets - whether it is a high asset divorce or not - are key parts of a proceeding and must be watched over very carefully.
Current statistics indicate that a large number of so-called "baby boomers" are divorcing at a high rate. With that, retirement accounts are a frequent issue in a divorce case. There are important facts that must be considered. These include the owner of the accounts, taxes, the differences between retirement accounts, and options that might be available with the retirement accounts. Ownership of the account will generally be split equally if it was acquired during the course of the marriage. Once the marriage ends, couples often forget to remove the former spouse as a beneficiary. This is an oversight that should not occur.
Taxes can cut into the value of a retirement account. With a pension, an IRA or a 401(k), it will be subject to taxation when money is taken out. A Roth 401(k) or IRA is subject to tax when money is put in, but will be tax free when there are withdrawals provided certain requirements are met. Understanding these issues is key with a divorce. The change from a joint account to a single account can impact the value depending on the amount that the participants earn. Those who are in a different tax bracket need to be aware of the need to adjust for this.
There might be a temptation to exchange a retirement account for real estate. A person who wants to keep the family home might not realize that it could be a negative in the bottom line over the long run. Maintaining a property can be costly and many people are better off simply letting go of the property and keeping the stake in the retirement account as it has less fluctuation. With a divorce, property division and allocation of assets can be an unwanted stressor, but it is still important. A legal professional can help to deal with these complex issues while providing protection and advice.
Source: CNBC, "Memo to divorcing boomers: Watch your assets," Jessica Dickler, Sept. 9, 2016