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Ways to approach investments in a split

When divorce happens later in life, as some California couples have learned, there might be investment and retirement accounts that make the process of dividing assets more complicated. Additionally, the division of some of these investments might trigger penalties and taxes that can be avoided. Finally, the way these assets are divided can have an impact on financial stability post-divorce.

The ways to approach investment accounts differ based on the type of account the spouses hold. Retirement accounts, which are usually considered marital property, can be complex to divide. 401(k) or 403(b) plans can be divided by using a Qualified Domestic Relations Order, or QDRO. Each plan, however, has different rules for how the division will happen with some requiring the fund being divided to be rolled over into an IRA and others allowing the other spouse to open his or her own account within the plan. IRAs are divided differently based on the negotiations of the couple. However, to avoid taxes, the division must come from a court order from the divorce, and the funds must be rolled into separate IRAs.

Investment accounts will also be processed differently depending on their type. With taxable accounts, a letter must be written to the financial institution asking to close the account and open two separate accounts with each of the spouse's names. Not all accounts allow funds to be transferred to a different firm, so this must also be considered. In those cases, closing the account and withdrawing funds might lead to penalties and taxes. If there is concern that a spouse will make unauthorized withdrawals, the other person can request that the account be frozen until they can come to a divorce agreement.

The divorce process involves many steps and procedures. A lawyer with family law experience might help his or her client deal with each step and provide advice and representation during the process.

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Law Offices of Catherine A. Schwartz
6877 Magnolia Avenue
Riverside, CA 92506

Phone: 951-335-0510
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