Clearwater Divorce Attorney Garry Potts Family Law Blog
As the first of baby-boomer generation reaches their sixties, their generation is divorcing more than ever before. According to the Wall Street Journal’s Smart Money, couples age fifty and over have doubled their divorce rate over the past twenty years, during a time which saw the overall divorce rate decline slightly. With many middle-aged couples working on their second or third marriages and others re-evaluating theirs once the children leave the nest, baby-boomers are feeling freer to break the bonds of matrimony than ever before. The timing of their divorces raises unique and potentially perilous issues. Smart Money identified some potential pitfalls that baby-boomer divorcees should avoid. The number one pitfall named was failing to take into account tax penalties on distributed retirement accounts which are cashed out in order to distribute marital assets or to provide funding for payments provided for in the marital settlement agreement.
Clearwater, Florida Divorce Attorney Garry Potts can help find the best solutions to many problems such as these which may not be obvious to the spouses during their divorce. To avoid overestimating the true value of any tax-deferred retirement accounts distributed among the spouses as a result of a divorce they should keep in mind the purpose of those accounts and the tax consequences of early withdrawals. Just as in their marriage and throughout life, it is always a good idea to leave tax-deferred retirement funds intact and avoid incurring the significant penalties and taxes which follow cashing them out. However sometimes those accounts are the only significant source of funds for necessary payments in a divorce settlement. One spouse’s retirement account can be divided with the other spouse in order to achieve an equitable distribution of marital assets without causing expensive tax consequences. This can be accomplished in a divorce by using a qualified experienced professional to prepare a qualified domestic relations order (QDRO) and have it properly signed by the judge. A properly prepared QDRO will allow funds from a 401 (k) to be distributed as directed by the judge without incurring the significant IRS penalties for early withdrawal. Clearwater Divorce Attorney Garry Potts will assist you in accomplishing this for your divorce by directing you to a qualified professional to prepare the QDRO and coordinate it with the administrator of the retirement account.
Call the Law Office of Garry Potts today to schedule a consultation.
