Retirement accounts are often an important issue for Georgia couples who divorce later in life after the age of 50. The end of 2018 marks a time of significant change regarding how divorced couples will handle their taxes. Among the biggest differences is that after January 1, 2019, tax regulations will no longer allow deductions for alimony payments, and payments will no longer count as income for the person receiving them. Some observers had predicted that the change would lead to a rush of divorce settlements during 2018.
That rush has not occurred, though, according to a divorce attorney who practices in New York. He said it seems like people are ready to live with the new rules. It may be that determining the dollar value and timing of alimony payments is simpler than deciding where the money will come from and how the parties will prepare for tax consequences. In most cases, even in high-asset divorces, the two most valuable assets tend to be the retirement accounts and the house.
When dividing assets, it is important to consider immediate and future taxes. A brokerage account that the couple has invested in for years might have large amounts of embedded capital gains that reduce its value. Roth retirement accounts might be worth more than their traditional IRA or 401(k) counterparts because the money in a Roth account has already been taxed while the funds in traditional IRAs or 401(k)s don’t reflect the true amount after taxes are taken out.
A lawyer with experience handling divorce cases might be able to help a couple divide assets in a way that is beneficial to both parties. Courts often require a qualified domestic relations order to be in place in order to divide retirement accounts. A lawyer might help a client deal with tax implications or draft the petition for divorce. An attorney also might argue on a client’s behalf during alimony hearings or help negotiate the terms of a property settlement.