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IRAs may be split during property division process

It is common for retirement accounts to be included as community property during divorce. This information means that it is possible for these accounts to be split during the property division process. When dividing an IRA, California residents may want to pay particular attention to how the funds are transferred.

If assets in an IRA are transferred directly into a savings account, it is likely that the account holder will still face considerable taxation on those funds. Even though the money is now in the account of an ex-spouse, the stipulations of the retirement account may still hold the account holder responsible for fees and taxes. Instead, individuals may do better by changing the name on the IRA itself to that of the ex-spouse or transferring the funds into the IRA of the ex.

Because the terms of a divorce decree can considerably impact individuals even long after the divorce is over, parties may want to ensure that they include pertinent details. For instance, people could indicate which party would be responsible for fees and taxes associated with IRA transfers. The decree could also stipulate how those transfers should take place.

Navigating the property division process is not an easy task. When complicated assets, such as retirement accounts, are involved, California residents may not know how to go about obtaining the best outcomes and could soon feel overwhelmed. Fortunately, interested individuals could enlist the help of experienced family law attorneys who could give advice and other guidance throughout the divorce process.

Source: financial-planning.com, "When your clients divorce, avoid this costly IRA mistake", Ed Slott, May 15, 2018

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