A Gray Divorce, What You Need to Know

What is a Gray Divorce? It’s a when older couples decide to split up and get a divorce. And, the closer you are to retirement, it’s crucial to know the rules and get it right!

According to the Pew Research Center, the divorce rate for adults over 50 has doubled since the 1990’s. In a gray divorce couples need to follow specific rules for dividing their 401(k) plans IRA’s and pension plans. You will need to understand that these accounts will need to be shared since the contributions came from the couple’s mutual income.

For 401(k) plans and pensions, you will need a qualified domestic relations order. It is submitted to the plan administrator and then a portion can then be transferred to the divorcing spouse. And if you take some of the cash out, for example for a down payment on a home, you will owe taxes on the distribution. If you roll the money into your own newly established IRA, you will not owe any taxes or penalties.

Division of IRA’s should be settled in a divorce decree or separation agreement. This will then be submitted to the IRA custodian. If you take some cash out of the IRA you will owe taxes plus a 10% early withdrawal penalty if you are under the age of 59.5. However, if you roll the money directly into an IRA there will be no tax or penalty.

Social Security benefits cannot be included as a marital asset. The higher earner might agree to provide monthly support payments or the couple may choose to trade off other assets to make up the difference.

If you’re thinking about divorce, Contact our law firm today to schedule an initial consultation with dedicated and compassionate lawyers.

 

 

Source: Kiplinger, “Dividing Your Assets in a Gray Divorce”