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Property division: Saving money when dividing retirement assets

When one is going through a divorce, there are many things on one's mind that one wishes to take care of as soon as possible. One important aspect of divorce that can often be overshadowed by more immediate matters such as child custody is property division, more specifically dividing one's retirement assets. Even though one typically wants one's divorce to be over as quickly as possible regardless if one lives in California or elsewhere, it is important to sort out all the details, even those that may not be an issue for several years.

The biggest factor to keep in mind when splitting up one's retirement assets is taxation. When transferring amounts from individual retirement accounts, it must be done in the correct way; otherwise, the transfer may be seen as a full distribution of assets, which does have tax consequences. If the separating spouses include it in their divorce decree, a trustee-to-trustee transfer will not be taxable.

Another way to ensure one's retirement assets are divided correctly is to have a qualified domestic relations order known as a QDRO. The QRDO is a legal document that gives instructions on how the assets are to be divided, and it is designed not to incur unnecessary penalties or taxes. This type of document typically only applies to workplace retirement or traditional pension plans.

Taking the time now to make decisions about one's property division in the future could very well save one a lot of money. While it may not seem as pressing to handle property division such as retirement assets during the divorce proceedings, it may be more beneficial to go ahead and get it sorted out than to put it off. California professionals in divorce law are available to give guidance to divorcing couples with questions about property division.

Source: Fox Business, How to Split up Retirement Assets in a Divorce, Marilyn Bowden, Sept. 16, 2013

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