With all of the property division issues that take place in the divorce process, many Utah couples can inadvertently forget about retirement accounts. After all, they are for the future, and this is happening in the here and now. These assets also need to be dealt with in the divorce settlement, especially if the account or accounts are to be split.
One of the best things about a retirement account is that the taxes are deferred so long as distributions are not made until a certain point in time. Any distributions taken before this time frame are taxable. However, money may be transferred if that transfer is part of a property settlement agreement or divorce decree. That is, it will be tax free so long as the transfer is done properly.
The best way to move the money is through a direct transfer from the account of one party to the account of the other party. So long as this is done in compliance with a final decree or property settlement agreement approved by a Utah court, the transaction will not be taxed. Different institutions have different rules for transfers, so is important that those rules be followed to make sure the transfer is not taxed.
The transfer should also not be made until a divorce decree or property settlement agreement has been approved by the court. Making the transfer prior to this point can cause the person transferring the money to be assessed the 10 percent withdrawal penalty is under the age of 59-and-a-half. It can be beneficial to have someone knowledgeable in how to handle retirement accounts in a divorce help with this issue to ensure that neither party has to pay any taxes in connection with the transfer.
Source: Fox Business, How to Split up Retirement Assets in a Divorce, Marilyn Bowden, Sept. 16, 2013
Subscribe To This Blog’s Feed