The end of a marriage can have a significant impact on a person’s financial future. For this reason, an individual in Florida may place a great deal of importance on pursuing a fair distribution of assets and debts during property division. However, there may be additional factors that could prove detrimental if overlooked, such as the potential tax ramifications of dividing retirement accounts.
There are certain measures one can take to avoid such a potentially disastrous outcome. When dividing retirement accounts such as a 401(k), obtaining a Qualified Domestic Relations Order (QDRO) is advisable. Should an individual attempt to remove the specified amount and give it to his or her former spouse without a QDRO, there may be consequences, as a similar action could result in devastating tax penalties.
Other retirement accounts, such as an IRA, might not require a QDRO. However, one may want to proceed with caution in this area as well, as dividing an IRA without first obtaining a divorce decree could also lead to tax fees and penalties. However, if a person obtains the proper documentation after his or her divorce is finalized, the transfer of the specified amount may be tax-free.
Divorce can be challenging enough on its own, and a person who is facing such a stressful and daunting life event will likely want to avoid any unforeseen and unnecessary consequences. However, property division can be a complex process, and seeking assistance from a family law attorney could prove beneficial. An attorney in Florida can cover every crucial aspect of divorce with a client and subsequently assist in pursuing an equitable portion during legal proceedings.
Source: marketwatch.com, “Getting Divorced? How to avoid tax pitfalls when splitting up retirement accounts“, Bill Bischoff, Aug. 1, 2017