When you and your spouse decide to divorce, it’s understandable that one or both of you may want the process to be over as quickly as possible. But, sometimes that may not be the best way to handle these delicate matters.
It’s irrefutable that couples with wealth and resources have much more to lose in a divorce than those who have amassed very little community property during their marriages. That’s why it’s especially important to strategize your approach when working through the divorce process. Below are some suggestions for achieving the best deal possible in your divorce.
Determine what you want
In a community property state like Washington, assets and debts will be split 50-50. That means that you need to think ahead and consider how each item could potentially be an asset or liability, both now and in the future.
Many divorcing spouses fight tooth and nail to hang onto the family home when seeking a larger portion of the retirement assets might serve them far better. Houses can become liabilities if the market tanks again. Then, too, are the taxes, maintenance and upkeep fees, which can be quite substantial if the property is upscale and/or in a neighborhood with an HOA.
Be mindful of taxes when seeking retirement benefits
Responsible Auburn family law attorneys will urge you to seek the guidance of a tax professional when determining which retirement assets to pursue in divorce. One financial planning professional in another state says that “[t]he No. 1 issue relating to retirement assets is taxation.”
No one wants to run afuoul of the Internal Revenue Service (IRS), so getting a professional opinion on your tax liabilities is always prudent.
You also want to time the transfer of retirement funds from one spouse’s account to the other’s to reduce penalties. Funds switched prior to a divorce being finalized can bring early withdrawal penalties to the account’s orignal owner if that spouse is younger than 59.5 years.
When you also need a QDRO
Few people are familiar with that term unless they have previously split retirement accounts in divorce. The acronym stands for qualified domestic relations order. QDROs facilitate the funds in a worker’s retirement account to be legally transferred to their former spouse without the usual penalties that accompany such transfers.
Typically, QDROs only apply to retirement assets in pension plans, 401(k)s and 403(b)s. But even though Roth IRAs don’t require QDROs, drafting one may also prevent other taxes or penalties from being deducted.
Cut the best deal that you can
By working closely with your Auburn family law attorney, you can walk away from your divorce with the resources and assets you need to begin your newly single life.