When a Florida couple is going through divorce, there are a number of important financial decisions that must be made. Property division is among the most important aspects of any divorce, especially for spouses who are nearing retirement age. It is important to understand the proper way to handle retirement savings during divorce.
When it comes to IRAs, spouses must understand that the transfer of assets from one account to another must be completed within a year of the time of divorce. Otherwise, the transfer will trigger an automatic IRS audit. It is also important to ensure that the IRA transfer is clearly designated as “incident to divorce,” so that neither spouse is hit with an early withdrawal penalty.
When it comes to qualified plans, a special document called a Qualified Domestic Relations Order (QDRO) is used to transfer assets. Here again, it is important to designate the transfer as a divorce-related process in order to avoid taxation or penalties. The spouse who receives assets by way of a QDRO is entitled to invest those assets in an IRA or separate qualified retirement plan.
Florida spouses who are preparing to divide their retirement assets during property division must take care to ensure that the transfer of assets is smooth and problem free. One final step that must be taken during the transfer is a review of the designated beneficiaries for each account. In most cases, spouses will wish to make changes to their beneficiary designations to ensure that their retirement savings passed down to the appropriate heir when the time comes.
Source: Forbes, “Divorcing? How to Split Up Retirement Nest Eggs“, Duncan Rolph, Nov. 23, 2016
When considering marriage, many Florida spouses are concerned about money management. However, very few take the time to actually sit down and hammer out a solid plan for how to combine and manage finances as a married couple. Prenuptial agreements offer a clear and well-defined path toward having those conversations. Unfortunately, few spouses recognize the benefits of negotiating a prenup.
A recently published article outlines the ways that couples can be successful, both financially and in marriage. One of the most important factors is being open and honest about the full scope of their individual finances prior to walking down the aisle. This is key to negotiating a prenuptial agreement, as individuals are unable to discuss the distribution of assets in a divorce if they are unaware of what assets and debt will be brought into the marriage.
The article also mentioned that couples who are open about their financial preferences and plans have a better chance of success. This is also an important component of negotiating a prenuptial agreement. By discussing each person’s goals and expectations, areas of potential conflicts will become clear. That is not to say that the marriage plans will not move forward, it just gives the couple a chance to discuss how to compromise and identify areas where each person can improve their financial skill set.
Prenuptial agreements often get a bad rap. Many Florida residents believe that the sole purpose of a prenup is to protect the more wealthy party from loss in the event of a divorce. In reality, however, prenuptial agreements are incredibly flexible and valuable financial planning tools, and can help a couple strengthen their marriage by discussing important matters early in their relationship.
Source: sfgate.com, “12 things successful married couples do with their money“, Emmie Martin, Nov. 10, 2016
When it comes to protecting assets from being ravaged during a divorce, it appears that Millennials in Florida and across the nation are taking a far more practical approach than previous generations. A recent survey by the American Academy of Matrimonial Lawyers suggests that younger people are pursuing prenuptial agreements at a rate far ahead of their parents or grandparents. The survey included the input of more than 1,600 family law attorneys.
In the past, prenups were primarily used to protect generational wealth. Today, however, prenuptial agreements have become far more flexible financial planning tools. For Millennials, that often means safeguarding property that is less tangible than investments or real estate.
Intellectual property is a primary area of focus for many Millennials who include prenups as part of their wedding preparations. In fact, many modern prenups center on issues of intellectual property. Examples include songs, software, apps, films and even ideas for as yet undeveloped technologies. That shift is an interesting change, as it addresses work that has yet to be created and, therefore, cannot be assigned a value. The more traditional approach was to specifically address wealth that was being brought into a marriage or matters of inheritance.
It appears that younger people are eager to preserve their right to the fruits of their creative labors. If that trend continues, many couples will gain a great many protections through the increased use of prenuptial agreements. Such proactive decisions can make worlds of difference for those Florida couples that will eventually experience divorce.
Source: Bloomberg, “Prenups for Ideas Are All the Rage With Millennials“, Polly Mosendz, Nov. 1, 2016
For many Florida spouses, the division of marital assets during divorce will have lasting financial ramifications. This is especially true for spouses who set aside their own career goals to stay home and raise a family, and to support the career path of their husband or wife. When it comes to property division, spouses who have been out of the workforce for a significant period of time must take care to negotiate a settlement that is fair and balanced. Unfortunately, there are cases in which doing so becomes a challenge.
Some spouses will make a concerted effort to deplete marital wealth in the months leading up to a divorce. They may do so out of anger or spite, or simple greed. This is especially common with high income spouses. They may feel that spending down marital wealth will reduce the amount that their spouse will receive during divorce, while also feeling certain that they will be able to replace any losses after the divorce is complete.
Dissipation of marital assets can take place in a number of different ways, some more creative than others. Spouses might spend money on a romantic partner with whom they are having an affair. Others might simply make extravagant or irresponsible purchases. Yet another common tactic is to “invest” in a business venture of a close friend or family member, with the intent of recouping those funds once the divorce is final.
In order to address dissipation of assets during a divorce, Florida spouses must be able to prove that their partner has acted to intentionally reduce marital wealth. A forensic accountant can play a critical role in determining the extent of the depletion of marital assets. The results can be used to negotiate a fair and balanced property division, or taken to court if the parties are unable to work out the terms of their divorce settlement.
Source: Forbes, “What Is Dissipation Of Assets In Divorce And What, If Anything, Can You Do About It?“, Jeff Landers, Nov. 1, 2016