Getting a divorce can certainly take a tremendous emotional toll on an individual in Louisiana. What was once a steady relationship has come to an end, sometimes amicably and sometimes with a ton of negative animosity. Moreover, divorced individuals need to find a way to begin their new post-divorce life. Although this can be emotionally challenging, it can also be a financial struggle as a divorce by necessity involves property division.
Amongst the assets to be divided are retirement accounts. Individual retirement accounts (IRAs), 401ks, and other investments can all be on the chopping block when a couple decides to end their marriage. Although dividing these assets may seem simple enough, there can be significant contention regarding how much each party should get. Additionally, there may be issues with regards to logistics of dividing these assets. The logistics should not be ignored, as doing so could lead to significant financial consequences.
For example, when an IRA is in question, one spouse can transfer funds from that IRA to the other individual’s IRA without tax consequences so long as it is performed in accordance with the divorce settlement. Divorcing couples should be sure to avoid transferring funds in any other way, or they could be at risk of being taxed, thereby diminishing each party’s share of the retirement account.
One way to avoid this is to obtain a qualified domestic relations order (QDRO). A QDRO is a legal document that, in essence, divides the couple’s retirement accounts. This order is beneficial to divorcing individuals, because it allows money to be transferred from account to account without fear of the funds being taxed or transfers being penalized. Those who want to learn more about how to effectively divide their retirement assets in a divorce in a way that protects their financial interests should be sure to discuss the matter with their family law attorney.
Source: Bankrate, “Splitting up retirement assets in a divorce,” accessed on Nov. 18, 2016