Getting Divorced? Avoid Tax Pitfalls When Splitting Up Retirement Accounts
On top of all the other stuff, getting divorced is also a major financial transaction that can have serious tax implications. This is especially true when it comes to splitting up tax-favored retirement accounts between you and your soon-to-be ex. You need to plan ahead to make sure the tax results turn out OK for you. Recurring litigation between taxpayers and the IRS shows many folks falling into expensive traps that could have been easily avoided. Here’s what you need to know to keep from joining them.
Use QDROs to divide up qualified retirement plan accounts
Say you participate in a qualified retirement plan at work — such as a 401(k) or profit-sharing plan. Or you might be self-employed with a small business retirement plan such as a simplified employee pension plan (SEP), Simple IRA, or solo 401(k) plan. You’ll probably have to divide up your retirement account (or accounts) between you and your ex as part of the divorce property settlement. However, doing it carelessly can…Read the entire article by Bill Bischoff on MarketWatch.com