How will retirement income be taxed after divorce?

Asked over 2 years ago - Boca Raton, FL

In cases where the ex-spouse get almost half of the amount of the retirement income ( as part of the divorce settlement ), will both parties be liable to pay the tax equivalent to the amount / portion of the retirement income one gets?

Attorney answers (3)

  1. Christopher P Norris

    Contributor Level 14

    3

    Lawyers agree

    Answered . that depends on how the agreement was set up. IRA's can be transferred from one to another with a copy of the decree and a letter sending as well as a letter accepting the monies into a similar account. 401k plans can be divided by qualified domestic relations orders (QDRO's) that basically turn one account into two separate ones without tax consequence at the split but each pay taxes on their own account when utilized. Some pensions cant be divided and thus the receiver pays the other their share. Hopefully your agreement took the tax considerations into account or the receiver could get stuck with all the taxes. The IRS will tax the person whose name is on the account that the money is taken from.

    This information provided is in the nature of general information and in no way creates an attorney client... more
  2. Henry Daniel Lively

    Contributor Level 20

    2

    Lawyers agree

    Answered . You will need to look to the QDRO. Ttpically the spouse that is awarded the plan pays the taxes.

    Any individual seeking legal advice for their own situation should retain their own legal counsel as this response... more
  3. Charles Adam Shultz

    Contributor Level 19

    2

    Lawyers agree

    Answered . Mr. Lively is correct. This depends on what happens in the divorce. To avoid a tax recognition to the participant spouse on the split up of the account, the divorce decree must meet the requirement of a Qualified Domestic Relations Order (QDRO). If that is the way the retirement account is split, you each would then have your own separate account and would be taxed when you withdraw the funds.

    The general advice above does not constitute an attorney-client relationship: you haven't hired me or my firm or... more
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