IRAs grow in importance in property division
As the tax laws change regarding alimony for divorces concluded in 2019 or later, many people are looking toward individual retirement accounts as a way to create fair settlements that preserve tax benefits for both parties. When the shifting of the tax burden for alimony goes into practice, the current environment that encourages generous support payments through a valuable tax deduction will change considerably. However, both parties will still be looking for a solution that provides a measure of tax protection for the paying former spouse while providing needed funds to the recipient.
The division oof IRAs is one way to accomplish this goal, especially as they can be divided tax-free. Of course, the division of retirement funds is nothing new in a divorce. In many cases, retirement accounts are among the largest assets that a couple has, especially when the couple involved has been married for some time. These valuable investment accounts can be a major part of a wealthy couple’s asset portfolio. However, in most cases, individually owned IRAs are the ones involved in a divorce, and they are split according to a court order.
Increasingly, inherited IRAs are coming to play a role in divorce property division as well. While in many cases they are not considered marital property as they are received as a separate inheritance, inherited IRAs can be used to settle other aspects of a couple’s asset division process. However, there is no clear tax standard for how these divisions are to be handled.
Dividing marital property can be a complex process as well as one that is emotionally and financially draining. A family law attorney can work with a divorcing spouse to achieve a settlement that is fair and just.