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More than value must be considered during property division

A common misconception about divorce is that everything should be split down the middle. In theory, that idea would seem to make property division really easy. In reality, couples who are going through a divorce must realize that not all property is created equally. One example of property that shouldn't be divided down the middle is retirement accounts and investments. Anyone going through a divorce in New Jersey should carefully consider more than just the valuation of these accounts prior to agreeing on how they should be divided.

With these assets, dividing them simply according to the valuation at the time of the divorce can prove to be a mistake. One reason for the need to look closely at retirement accounts and investments is because of the wide variation of tax liabilities that could affect the accounts.

When it comes to retirement accounts, each spouse could choose to just walk away with their own retirement accounts, but if your spouse has retirement accounts, such as individual retirement accounts or 401(k) plans, it might be possible to transfer some from your spouse to you as part of the divorce. Doing this usually won't involve any penalties or immediate taxation on the transfer.

Timing is everything when it comes to transferring assets like IRAs. You have to make sure that the divorce decree is approved by the judge or you risk facing a penalty. For a 401(k) transfer or pension funds transfer, you will likely need a Qualified Domestic Relations Order to avoid an early withdrawal penalty. This order can be included in the divorce decree.

As you are determining what assets you and your spouse must divide, you should make sure that you have accurate records of everything that is owned. Once the divorce is finalized, go through the retirement accounts and investments you own to make sure that your ex isn't listed as a beneficiary or account holder.

Determining tax laws and valuations of some retirement accounts and investments might mean you need to enlist the help of an attorney or financial advisor. Before agreeing to any property distribution settlement, make sure you have answers to any questions you have about the assets and their division.

Source: The Wall Street Journal, "If Divorcing, Divide Investments With Care" Lisa Ward, Apr. 06, 2014

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