The process of legally ending a marriage can be a complicated one due to the division of assets as well as the emotions involved. While it may be easy to forgo an asset, such as a share of a retirement plan, in favor of the family home, for example, this may not be in a person’s best interests. For many couples in Texas, retirements funds account for the couple’s liquid assets that are worth the most money, making it important for those going through divorce to seek a fair division.
There are a variety of different types of retirement accounts. How an account is divided and the process that division follows often depends upon the type of account. For example, some accounts, such as 401(k)s, require an order by the court, known as a qualified domestic relations order, to proceed.
Special considerations must also be made in order to avoid tax penalties. The division of an IRA, for example, must be indicated as an incident of divorce during a transfer. Failure to properly category a transfer could result in tax penalties to both the recipient and sender. If an IRA transfer does not take place within a year of the settlement, it could become the subject of an IRS review.
Even couples who are committed to a peaceful divorce require advice when it comes to certain matters, especially in regards to asset division. By having an experienced attorney guide the process, Texas couples can potentially avoid costly mistakes that could result in additional penalties. Additionally, such a professional can provide advice on a variety of different issues surrounding the end of a marriage.
Source: Forbes, “Divorcing? How to Split Up Retirement Nest Eggs“, Duncan Rolph, Nov. 23, 2016