Some Missouri residents considering divorce may be interested in the topic of asset division during this process. The financial separation can be distressing when steps are not taken to address the types of marital assets to be divided and the implications of division. This can be compounded when one marital partner is primarily responsible for the finances, and the other partner is potentially unaware of the extent or nature of the assets.
The tax implications of marital assets is a major factor. When dividing retirement accounts, a Roth IRA is the more valuable asset because it is developed with after-tax money, and distributions are tax-free. Taxable IRAs may yield possible penalties at withdrawal, although the 10 percent penalty for withdrawals when one is under 59 1/2 years of age is waived for 12 months after divorce. Capital gains of investments must be remembered; there is an exemption for the first $250,000 of gains from the sale of a primary residence.
The past five years of tax returns may reveal carry-forward losses or charitable contributions. Reductions in future taxes are assets but may be a cause for confusion at tax time after divorce if not assigned during asset division. Retirement asset transfers post-divorce are tax-free if designated as such, and a tax advisor may help with determining a basis from after-tax contributions to further reduce a tax liability.
Asset division in a divorce settlement may be complex and subject to state and federal tax liabilities. Counsel experienced in asset valuation, tax strategies, support and custody issues may help ensure an equitable settlement.
Source: Market Watch, “Divorce? The 6 worst money mistakes“, Leslie Thompson, September 23, 2014