Avoid taxes when dividing IRA funds in a high asset divorce
Most Kentucky residents rarely look forward to dealing with money issues. When those issues come about due to divorce, the situation can seem even more unpleasant to think about. Of course, high asset divorce can easily have complications, and individuals needing to divide IRA funds as part of the process will certainly want to ensure that they do not fall victim to undue taxation.
Because the use and withdrawal of retirement funds often leads to taxes and fees, individuals going through divorce need to ensure that they transfer IRA funds properly. The Internal Revenue Code must be followed in order for individuals to avoid facing taxes or failing to obtaining their due property. If divorcing parties want to divide these funds without penalty, they need to make sure that they have a decree of divorce or legal separation agreement.
If the IRA itself needs dividing or if one person chooses to use funds in an IRA to cover cash awarded to the other spouse, there are two ways this can take place without penalty or taxation. First, the parties can work with the IRA custodian to have the name on the account transferred to the spouse. Second, they could transfer the funds from one IRA directly into the receiving spouse’s IRA.
Dividing retirement funds or other complex assets during a high asset divorce can feel nerve wracking. No one wants to make a mistake that leaves him or her facing avoidable financial consequences. If Kentucky residents are interested in learning more about the proper way to divide retirement funds or how to protect their funds, they may want to consult with knowledgeable legal counsel.