Retirement and investment accounts require a great deal more attention than many couples give to them when it comes to a divorce. Too often couples simply split the proceeds without giving it more thought. But a great deal more analysis needs to be made before deciding what a fair split would be when it comes to these items.
To begin with, tax treatment will definitely need to be a consideration when it comes to the splitting of these accounts. Thought the accounts could be split equally, the tax liabilities for one spouse may be significantly different than those for the other spouse. The cost basis for one spouse versus the other could be significantly different. It can also be advantageous in some situations to transfer money from specific accounts to ones owned by the other spouse in order to avoid certain tax liabilities.
Not all couples even know what they have when it comes to these accounts. Therefore an inventory of all of the individual and jointly owned accounts should be made – preferably even before a divorce is about to take place. This inventory should also take into consideration stocks and bonds that may have been stored away and forgotten, or accounts that are still listed under one’s maiden name.
Obviously it’s important that couples be diligent in examining all accounts so that nothing is left for chance at the time the divorce is being finalized. Failure to do so could result in money being lost or funds going to the wrong individuals.
As Pennsylvania has its own unique set of rules concerning taxes and other family law matters, residents of our state are strongly advised to speak to a licensed attorney from Pennsylvania. If couples cannot come to an agreement regarding division of assets, it’s likely going to end up being decided by the courts. This is a contingency that many couples will wish to avoid.
Source: The Wall Street Journal, “If Divorcing, Divide Investments With Care,” Lisa Ward, April 6, 2014