One of the more complicated issues in divorce, especially for older couples in New York, is how to divide IRAs and other retirement accounts. As you probably have different types of requirement accounts, you’ll have to abide by the rules for each, even if you agree on dividing the account in the same percentage for each.
Pay attention to the rules
A good rule of thumb in complex asset division is to take stock of all of your requirement accounts and pay attention to the requirements for each. Because the rules vary, you could easily become tripped and end up losing a lot of money in taxes and irritation. Transfer incident to divorce governs the division of IRAs while qualified plans like 401(k)s must have a qualified domestic relations order, or QDRO, in place before dividing the assets.
Once you decide how to divide your assets, you’ll also need to update your beneficiaries. If you choose to remarry in the future, it may be a good idea to create a revocable living trust naming your children as beneficiaries to ensure that they receive your assets.
Retirement accounts don’t have to be split 50/50
Equitable distribution doesn’t always mean a 50/50 split of your assets, including retirement accounts. Devising a strategy for the division of your retirement accounts, along with the correct filing status, will go a long way toward maximizing your retirement funds.
Attention to detail is paramount. You must pay attention to all laws, including those on the state level, to ensure that you don’t incur penalties. Properly dividing each account can help you protect your financial future.