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Dividing retirement funds during a divorce

Divorces are difficult enough, without needing to take into consideration the division of marital property. However, the process of property division is oftentimes an area where divorce disputes are prone to arise, so it can be helpful to be aware of common issues and resolutions which may help avoid additional complications. In particular, how to divide complex assets like retirement funds can prove to be challenging to many couples, but there are several common considerations, which can make this process easier.

Oftentimes the first consideration is whether or not a retirement fund will be split between the two, or if one individual will be allowed to keep the entirety of the retirement in exchange for an equitable proportion of other assets. Since both options are possible, it may be worth it for both individuals to consider which of these options is preferable to them.

If the assets are to be split, it is important to consider the tax ramifications. While transfers from an IRA to another are typically not taxable if done for a divorce, it may be taxable if not done properly. In fact, some experts in the field say that couples could potentially lose nearly half of retirement assets if the transfers are not done with due diligence. One option which some experts suggest is dividing the assets with a qualified domestic relations order. By using this legal document, the division of assets can be stipulated along lines agreed upon by the divorcing parties.

In addition to these considerations, there are other details which could influence the division of a retirement fund. For example, updating the beneficiaries for the plan after a divorce can be the difference between having access to retirement funds or not. Since divorce and property division issues can be complicated and have lasting legal ramifications, many experts suggest keeping files from the divorce on file, including those regarding the split of any assets. To learn more on the implications of dividing a retirement fund, it can be helpful to discuss any concerns with an experienced divorce lawyer.

Source: foxbusiness.com, "How to Split up Retirement Assets in a Divorce," Marilyn Bowden, Sept. 16, 2013

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