Getting divorced is one of the most challenging events an adult can experience. Unfortunately, sometimes divorce is inevitable due to irreconcilable differences between spouses. A couple of tips may help with dealing with the financial part of getting divorced, which can be just as complicated as the emotional aspect of a marital split-up.
During divorce, marital property is divided in an equitable manner in New Jersey, which is an equitable distribution state. This means that the splitting of assets will be done in a fair manner, although fair does not necessarily mean equal. Either way, one spouse might be awarded a portion of the other party’s 401(k) through a qualified domestic relations order, or QDRO.
Weighing how assets are taxed is critical before choosing to divide them. For instance, even though $100,000 in a traditional individual retirement account might seem to be equal to the same amount of money in a brokerage account, these accounts’ tax treatments are vastly different. Traditional individual retirement accounts hold pre-tax contributions, so the distributions will end up being taxed as ordinary income during retirement. Meanwhile, brokerage account funds have a much smaller tax burden on dividends, capital gains and interest.
Going through the dissolution of a marriage can be tough at any age, but it can be especially challenging for those nearing retirement. An attorney in New Jersey can offer guidance on the best way in which to divide assets considering one’s personal goals. If a divorce settlement cannot be reached at the negotiating table, then going to trial to fight for a fair share of assets is necessary.
Source: newsok.com, “Don’t Let Divorce Ruin Your Finances“, June 22, 2017