On behalf of Tasha K. Schaffner of Schaffner Family Law posted in divorce on Tuesday, November 14, 2017.
Planning for retirement is often a main focus for many Kentucky couples. Not only do they dream of days when they can travel, spend more time with family or just stop working, but they also focus on how they will get there. This is where building retirement funds comes in, and during the marriage, both parties may concentrate on building this nest egg. However, in a divorce, that nest egg can become a point of contention.
Partly due to the costs associated with a traditional divorce, many couples are avoiding the courtroom like the plague. Instead, they are working out their issues on their own. This may be admirable to many, but there are also significant financial risks in doing so, especially when it comes to retirement accounts.
There is often more to dividing retirement funds than just transferring or withdrawing money from the account. If not done properly, the parties could end up with high tax bills that put them in a precarious financial position. What many Kentucky couples may not know is that there are ways to avoid paying the taxes and penalties associated with dividing these accounts. Internet research only takes people so far since many of the documents necessary to appropriately divide retirement accounts requires particular language.
Any upfront costs will more than likely be worth it when the parties find out what the tax bill would be without documents such a qualified domestic relations orders, which are needed to avoid the tax ramifications of dividing a 401(k), for example. This is just one area where attempting a “do-it-yourself” divorce can end up being more costly in the future. Hesitating to hire a divorce attorney due to the cost could easily backfire when it comes to the division of retirement accounts and other assets.