People who plan for their retirement may find themselves in a much better financial position than those who do not. Unfortunately, profound life changes could affect retirement planning, such as filing for divorce. Since both spouses may rely on individual retirement accounts or other savings for their golden years, these assets could become critical items negotiated in a New Jersey divorce settlement.
Addressing common retirement accounts
Besides an IRA, many people rely on a 401(K) for their retirement savings and investments. The court may divide the IRA through a “transfer incident to divorce,” and the 401(k) becomes subject to a “Qualified Domestic Relations Order.” Not all non-IRA accounts are 401(k) plans. As with a 401(k), a QDRO could address the division of such accounts.
Both spouses may escape any tax requirements for these accounts as long as the transfer and division follow the appropriate court process. Not all divorcing spouses would be in a situation where paying a large tax bill proves financially feasible.
Spouses seeking a divorce might be entirely unaware of how family law and tax laws work. They may rely on an attorney to explain the process and provide the necessary representation in court.
Examining other retirement concerns when divorcing
Dividing up retirement assets may not cover all the expenses the newly-divorced experience. Therefore, divorce settlement negotiations may require carefully considering several financial concerns by one or both parties.
Should one spouse seek maintenance payments? Would it be best to sell the house now, divine the proceeds, and invest the money? Maybe discussing concerns with a financial planner would be a good idea.
Someone with concerns about the division of retirement assets could speak with a divorce attorney. The attorney may advise clients on feasible outcomes from the settlement negotiations.
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