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My wife and I are going through a divorce and I have a

My wife and I...

My wife and I are going through a divorce and I have a couple questions on moving our assets around and tax implications

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

We had joint retirement and checking/savings accounts. We are dividing up all those assets and creating new accounts for my wife and removing her from my accounts. If we do this before we are legally divorced, will either of us have to pay extra taxes?

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Answered in 8 minutes by:
3/9/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Finance
Satisfied Customers: 2,634
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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My name is***** will assist you today.

Please give me one moment while I review your question and type my initial response

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Customer reply replied 4 months ago
OK, thank you Chad

Transfers between spouses are generally a non taxable event.

However, you can not and do not have joint retirement accounts. ---You should not distribute tax deferred assets between accounts. Under certain circumstances a transfer between tax deferred accounts of divorcing spouses may occur with a court divorce order.

Please let me know your follow up questions.

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Customer reply replied 4 months ago
transferring assets between mutual funds/stocks at a broker would be taxable without a court order?

If the funds were in a tax deferred account such as an IRA or 401K

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You could open separate taxable accounts and separate the assets you purchased with post tax money.

Please let me know if this clarifies your question.

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Customer reply replied 4 months ago
We were looking at transferring funds/stocks from my IRA to hers prior to getting the courts involved. From the information you've provided, it sounds like there is tax risk in that process. We can figure out a better plan, but thought that may be the easiest.

Please do not do that.--Transfer the funds between IRA's before divorce

You are still able to amicable request that the court order the distribution

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Customer reply replied 4 months ago
Thank you! We have not done that yet and now won't. Appreciate your help.

Here is some additional information

"When one spouse transfers an individual retirement account (IRA) or a portion of an IRA to a spouse or former spouse under a divorce decree or under a written instrument incident to a divorce, that transfer is not considered a distribution to the owner of the IRA. The Internal Revenue Service (IRS) has also ruled that entering into a post-nuptial agreement that provides for the distribution of an IRA in the event of a divorce is not treated as a distribution."

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Finance
Satisfied Customers: 2,634
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
Verified
Chad EA, CDFA®, CFP® and 87 other Finance Specialists are ready to help you
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Therefore, you don't necessarily need a Qualified Domestic Relations Order (QDRO), but you will need a form of a written agreement signed by the court

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Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

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