When a small-business owner gets divorced, significant tax consequences can follow. In this issue, (Part 2) of my series on divorce, I’ll explain how to split up qualified retirement plans like your IRA, without shooting yourself in the foot.
If you want to learn specific ways to prevent Uncle Sam from taking a big cut of your assets, check out my latest article titled Tax Tips: Tax Tips for Divorce (Part 2).
Three ways our fact-filled article can help you:
- We’ll tell you what to do if you have a profit-sharing plan, 401(k) plan, or defined benefit pension plan for your business. If you have such a plan, you’ll probably be required to give your soon-to-be-ex a chunk of the money in your account as part of the divorce property settlement. If you want to make the payment without putting yourself on the hook for taxes on money that goes to your ex, read the full article.
- You’ll learn why “QDRO” language belongs in your divorce papers. A qualified domestic relations order, or QDRO, is language that establishes your soon-to-be-ex-spouse’s legal right to a percentage of your qualified retirement plan account balance or benefits. But don’t panic. QDRO language in your divorce papers gives you some big benefits as we’ll explain when you read the full article.
- We’ll tell you the magic words that should be included in your divorce papers. Good news! You can make a tax-free transfer of all or a portion of an IRA balance to your ex if, and only if, the transfer is ordered by your divorce or separation instrument. We’ll tell you the language you should consider using when you read the full article.