McCoy Fatula, APCMcCoy
Fatula
Located in Roseville, CA
916-945-2780

Financial consideration for couples facing a gray divorce

The divorce rate for couples in their 50s and 60s has doubled and tripled, respectively. Changes in the alimony tax laws have led couples to rush to finalize their divorces before the end of year, though those who live in California have missed the chance to take advantage of the current tax laws if they did not file prior to July of this year. Along with alimony concerns, there are other financial matters that require thorough consideration. 

Settlement disagreements often involve the division of retirement accounts. In the case of a 401(k) and similar pension plans, the division requires a Qualified Domestic Relations Order (QDRO). These orders may designate either a set monetary amount or a percentage that is to be shared with the former spouse. These orders need reviewed by the employer's human resources department to ensure that it complies with current laws. Once these assets are divided, it is recommended that the amounts are rolled into a separate IRA. 

Individual retirement accounts can be spilt without a QDRO, though there could be a tax penalty if the funds are not rolled into a new IRA account. If one needs cash for expenses, it may be wiser to take it from a 401(k) to avoid additional penalties. The decision of how to handle a marital home may also require careful planning, especially if the spouses choose to sell. In addition, the cost of upkeep of the home may be cost-prohibitive as certain loan interest may no longer be tax-deductible and the cap on property tax exemptions has been lowered. 

Along with the aforementioned considerations, there may be other aspects that a couple needs to address before finalizing a divorce. While states such as California have community property laws, the division of certain assets requires careful preparation to avoid unnecessary expenses. An experienced attorney can help draft a settlement agreement that best meets one's present and future needs.

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