Divorces are up among those 50 and older in the United States. In fact, this group's divorce rate has more than doubled since 1990. Perhaps one of the most concerning side effects of this trend is the risk that it poses to retirement or investments that one or both parties may have amassed.
Data compiled in 2015 by the National Center for Heath Statistics showed that 10 out of every 1,000 couples in the 50 to 65 age group get divorced. This is precisely double the number that was reported in 1990.
This concept, known as 'gray divorce' is believed to be on a upward trend as more and more parents send off their kids into the real world either to start college or work. When they do so, they're left with an empty nest. Parents find that the chasm that has been created from essentially not interacting with one another on a romantic relationship level for years is too hard to mend.
When these couples ultimately choose to divorce, they do so at a time in which their income is slated to become half of what it once was because of retirement. The idea of having to divide up investments such as 401(k), 457, and 403(b) accounts, couldn't come at a more financially unstable time.
In dividing up these assets, you'll want to avoid simply writing a check to your spouse for their portion of an investment account. That can lead to your being assessed unnecessary taxes or penalties.
Once you're sure what is an equitable division of that asset, you'll want to state in the divorce decree that it's going to be transferred to your ex when the process is finalized. This will help avoid the Internal Revenue Service (IRS) taxing those funds.
When it comes to IRAs, a Qualified Domestic Relations Order (QRDO) is not necessary in order to transfer it to someone else. However, for other assets, it is. Not having one in place can result in it appearing that you received the proceeds yourself as income. In this case, the IRS may tax these funds as a taxable distribution if not properly handled.
If you're preparing for to leave your spouse, then it's important that you hire a Fort Myers, Florida, divorce attorney that is well versed in QRDOs and high-asset division matters.
Source: CNBC, "A costly ‘gray divorce’ can upend your retirement plans," June 21, 2017