When one is going through emotionally difficult times, it can be quite difficult to see the road immediately ahead. In divorce, however, it is necessary to consider not only the short term implications, but also the longer term ones. This will apply in particular to California residents who have financial arrangements that relate to retirement.
There are a variety of different ways in which one may intend to fund one’s retirement, including IRAs. Some of these assets may have to be divided with one’s spouse as part of the community property settlement. In addition, in the event of death, it is often one’s spouse who is the beneficiary (though not in all cases). Some retirement funds may allow one to nominate a child as the beneficiary instead.
A more immediate issue are the tax consequences that can arise as a result of dividing these assets. If matters are dealt with incorrectly, or outside of time restrictions, then the tax burden may be higher. Complications arising from errors may not reveal themselves until much later, making them more difficult to unravel as a result.
Divorce may be one of the most difficult emotional periods one may encounter, but there are ways in which California residents can make the process smoother. Whatever the circumstances, it is helpful to gather all papers together in order to create an overall picture of one’s present financial situation. Appropriate advice and guidance in conjunction with accurate records can assist in moving forward to a positive future.
Source: Forbes, “Divorcing? How to Split Up Retirement Nest Eggs“, Duncan Rolph, Nov. 23, 2016