On behalf of The Marks Law Firm, L.L.C. posted in Divorce on Friday, June 24, 2011
A song from the Baby Boomer generation once proclaimed “different strokes for different folks.” It turns out that people at different stages in life have different needs as they go through divorce.
Young parents tend to focus on child custody issues whereas Boomers are often focused on the division and security of things such as retirement plans, Social Security benefits and pensions.
Fox Business recently spoke to a wealth manager to get tips and information for Boomers.
Retirement assets: these assets typically get divided in divorce. In marriages where one spouse was the primary source of income, a court will try to divide assets into equal parts.
In situations with a pension plan, family law attorneys will often draw up a document that states that when the party with the pension retires, a part of that pension will be diverted to the other spouse. The same kind of arrangement can be made with a 401(k); in some cases, a portion of that asset can be rolled into the other spouse’s IRA.
In some situations, the 401(k) payout can be structured to avoid a state or federal income tax hit. An exception would be in the case of a lump sum payout, which would be taxed as income when it’s received.
Spousal support: also known as alimony. The tax rules that apply to alimony boil down this: spousal support is deductible for the payer and taxed as income for the recipient. This differs from child support, which is neither taxable nor deductible.
Social Security benefits: in certain situations, ex-spouses can qualify for these benefits based on their former spouse’s earnings.
As a rule of thumb, the non-working spouse can expect approximately half of what the working spouse would receive at retirement.
Source: Fox Business: “How Boomers Can Protect Assets in a Divorce” by Casey Dowd: June 23, 2011