Sometimes, when going through the divorce process, decisions are made that can actually come back to bite one party in the long run. For example, a retirement account may be drained before divorce proceedings are finalized in order to pay off debts for one or both spouses. If the proper forms are not filled out and filed when doing this, the account owner may suffer financially down the line. Ohio residents can turn to a family law attorney who can help them properly split or drain retirement accounts as part of their divorce property settlements.
Picture it — a couple is going through a divorce and money is tight. The husband has money in an IRA and decides to empty the account in order to pay off a loan for his wife rather than just giving her the money. After the divorce is over, he is hit with early distribution fees and a hefty tax bill. What happened?
What happened is that, in his attempts to solve a debt issue he failed to file a qualified domestic relations order form and neglected to give the money directly to his wife as part of their divorce agreement. When this distribution was reported to the IRS, there was no record that the money was accessed for divorce purposes. This means that instead of the distribution being labeled as a qualifying life event, it was labeled as no known exception and the husband now has to pay the fees and taxes for taking out the money early.
This is a costly mistake that can easily be avoided simply by filling out a QDRO form and paying the necessary processing fee. Those who are divorcing in Ohio can turn to a family law attorney in order to make sure they are doing all that is necessary to avert any missteps that can hurt them financially in the future. With the right help, it is possible to secure property division settlements that truly serve the interests of both parties.
Source: Forbes, “IRA Withdrawal Penalty A Cost Of Do-It-Yourself Divorce“, Peter J Reilly, June 30, 2017