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Asset division challenges for older couples

Older couples in Massachusetts face unique challenges when they go through the divorce process. These so-called "gray divorces," which involve spouses over the age of 50, are more likely to involve issues with asset division and retirement savings plans.

Even if there is a willingness to be generous with asset division during divorce proceedings, there are certain rules that determine how 401(k)s and IRAs are divided. With annuity contracts, assets may need to be traded off to avoid affecting value. One of the biggest surprises for some divorcing older couples is having to split retirement plan assets. This may be necessary if both partners contributed to an account. There could be additional issues if multiple accounts are involved.

A qualified domestic relations order is needed for pension plans and 401(k)s to acknowledge that a former spouse is entitled to all or part of an account owner's plan. When 401(k)s are split with a QDRO, a divorce-related break is available. If an account owner opts to take cash out for a new home or other purposes, taxes will be owed on the distribution; although, an early withdrawal penalty won't apply. Taxes and penalties can also be avoided if the funds are transferred directly to an IRA.

When assisting with property division and asset allocation in a gray divorce, a family law attorney may check to see if the other party has outstanding loans being repaid from their employer paychecks. In regard to IRAs, a lawyer can help prepare the necessary divorce decree or separation agreement that has to be presented to the IRA custodian. In some cases, an attorney might help a lower-earning partner secure monthly payments for a specific period of time.

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