Know the consequences of handling assets during a divorce

The divorce process in Delaware can be emotional and frustrating. However, it’s best to be prepared with as much information as possible to help you make correct decisions about your future. Dividing assets, such as annuities, IRAs and 401(k)s, may be required. Understanding their pros and cons is essential to safeguard your fair share.

Knowing how to handle a 401(k) during a divorce

If you’re getting a divorce and a 401(k) is involved in the process, you may want to keep it in exchange for an equally valued asset. Dividing a 401(k) can be trickier, requiring close examination. Typically, tax consequences will be involved, which can be costly. Another alternative is to roll your 401(k) into an IRA, allowing you to avoid penalties and tax liability.

When dividing a 401(k) during the divorce process obtaining a Qualified Domestic Relations Order (QDRO) should also be considered.

How should you handle an IRA during the divorce process?

It’s usually easier to split an IRA during the divorce process. However, it’s usually best to consider the tax consequences. Did one of you have the IRA before you got married? This element is also essential, especially since you don’t live in a community property state.

Getting divorced and splitting an annuity

Considering tax consequences should also be done if you are splitting an annuity during a divorce. Contacting the annuity carrier can help with this process. Similar to splitting an IRA, it may be more straightforward for one of you to keep it and exchange an equally valued asset. Another method is to divide the annuity during the divorce process and start one or more new contracts. This action can be highly beneficial if you want to avoid taxes.

Examining the choices involved in these decisions is critical when splitting assets during your divorce. Knowing the tax consequences of each scenario can be helpful.