Oceanside couples who are getting a divorce should learn about how they can reduce the loss of valuable retirement assets with the right care.
Spouses in and around Oceanside, California that have made the choice to end their marriages must suffer a wide range of losses and difficult choices. From loss of time with children to setting up new residences and lives, the effects touch every part of a life. For many people, retirement accounts such as 401K accounts or pension funds must be split as part of the property division settlement of their divorce.
The act of splitting such funds will naturally result in each member of the divorcing couple receiving only a portion of his or her savings. However, there are some losses that can be prevented if the right procedures are followed. These are related to the taxes and early withdrawal fees that can be assessed if the right steps are not taken.
What can cause tax and penalty assessments?
Retirement accounts are held in one spouse's name only. When the assets must be split between both partners, monies must be dispersed from the account to the appropriate spouse. It is as this point that the funds become potentially liable for tax or penalty assessment. This can happen if the IRS or the Franchise Tax Board deems the disbursement to be an early withdrawal for the purposes of simply obtaining the funds when not for retirement needs.
How can the assessments be avoided?
Forbes highlights the importance of putting any money received from a retirement account disbursement from a divorce promptly into a new and qualifying retirement account. A report about one California woman's choice not to do this points out how she came to be left with a very large tax bill assessed on the money that she kept instead of reinvesting. Her efforts to fight the tax assessments were unsuccessful, point out how important this step is.
The Tampa Bay Times and Fox Business also point out how the use of a Qualified Domestic Relations Order can make a big difference in letting tax entities know that certain financial transactions are part of a divorce, thus helping to prevent unnecessary tax and penalty assessments.
The loss of retirement funds can be problematic for anyone but especially so for those persons with fewer years left to make up the losses. The National Center for Family and Marriage Research highlights the growing number of divorces involving persons over the age of 50 for whom this should be of concern.
Recommendations for divorcing couples in Oceanside
People who face the prospect of divorce should always seek help from legal professionals. Getting the right guidance from the beginning can save valuable assets down the road.
Keywords: divorce, retirement, assets