Divorce Newsletters

Another Way to Access Retirement Money

The biggest investment account that we see in many divorce cases is a retirement account, typically an IRA or 401(k). On occasion, this account must be tapped into to access cash needed to buy a new house, for living expenses, or other needs. Unfortunately, account owners under age 59 ½ will pay a 10% penalty with every withdrawal on top of paying income tax at their ordinary tax rate, which could reduce the gross withdrawal by 20% to 45%. However, there is a way to take a withdrawal from an IRA (or 401(k) if the owner no longer works for that employer) without the 10% penalty. It’s called a “72-T” withdrawal.

Amending your estate planning documents during the divorce process

With the rise of the “gray divorce”, there appears a new area of consideration. Should the parties amend their estate planning documents while they are still married?

Gone, But Not Forgotten

This year there have been many changes to the income tax code. One of the most notable is the “elimination” of the personal exemption. In actuality this exemption is not gone and still has an impact on divorces involving children.

Dividing an Inherited IRA in Divorce

Dividing traditional and Roth IRAs in a divorce is not complicated. No special forms are needed (other than the divorce decree) and the transfer to the receiving spouse is non-taxable as long as the money is received into that spouse’s IRA (or Roth IRA) account. However, dividing an inherited IRA is a bit more complicated. There are special considerations when dividing this type of account.

New Tax Rules Affect Divorces

The Republican Tax Bill recently enacted has something for everyone – but not necessarily something positive. Let’s look at how the bill may affect divorcing couples.

Start the QDRO Process on Day 1

Your new client, Mark, arrives at your office armed with a pile of documents. You’ve asked him to bring statements for all of the couple’s assets and liabilities, a pay stub, tax returns and a company benefits statement. As you sift through everything you notice that Mark has a pension with his company. This should set off a bell in your head: Start the QDRO Process!!

The Year-End Deadline

Once Fall approaches many couples set a deadline of December 31^st by which they would like to have finalized their divorce. Setting such an arbitrary end-date has its pros and cons. Let’s look at why it may be good or bad to focus on December 31.

Nesting and Divorce

“Nesting” is a relatively new concept in divorce. The term refers to a housing situation in which the children live at one house and the parents take turns staying in the house. It is felt that this is beneficial to the children, who don’t have to change locations every few days and can stay on a more consistent schedule, helping them to adapt to the divorce. In addition, it can save money since both spouses can maintain a smaller, one-bedroom off-site residence. Some couples use nesting on a temporary basis, perhaps until the divorce is final or through the school year, while others nest for longer periods of time.

“Options to Buy Unit” for Divorcees

I received this very interesting question from a divorce attorney recently:

I have a divorce case where there is a dispute over an option to buy in the parties’ residential lease.The parties did not pay for the option to buy and the rent paid does not lower the purchase price. However, the purchase price in the option is $70,000 and the fair market value may be around $100,000. My thought is that this option has no value.

Complications of Tax Returns

Last September I wrote about issues related to the income tax return that can arise in a divorce. Some income or expense items that the couple share on their tax return will need to be divided or assigned to one or the other party once the divorce is final. I briefly mentioned two areas, estimated tax payments and tax refunds, that warrant more investigation.