When California couples divorce in their 20s and 30s, both partners still have significant earning potential. Primary assets typically include a house and cars, while spousal and child support are points of contention. However, when mature couples divorce, the children are grown, careers are winding down and asset division is more complicated. At the Law Offices of Jonathan D. Larose, APC, we often assist clients in splitting investments, income and wealth from multiple sources.

Complicated finances for older divorcing couples

Kiplinger reports that in the last 20 years, divorce rates have doubled for Americans 50 years and older. High-earning older couples typically have more complicated financial situations, with multiple pensions, IRAs and 401(k)s. Annuities, which are challenging to divide, are also increasingly common. As a result, following specific rules is critical to split everything equitably and avoid one of you facing an unexpected tax bill.

Splitting everything 50/50 may be tempting, but it is not that simple. Pensions and 401(k)s require a judicial decree. If a 401(k) rolls over to a new IRA, there are no penalties or taxes, but you must pay taxes if you take some of the cash out. Change your beneficiaries at this time if you do not want your ex to receive the proceeds after your death.

Divorce decrees and separation agreements

The separation agreement or divorce decree can detail the division of an IRA. Although a judicial order is not needed, you must submit the official documentation to the IRA custodian. Even though the process for splitting an IRA is less complicated than other retirement plans, tax rules still apply. Understanding them before dividing the proceeds can help you avoid unexpected penalties.

The process and requirements for splitting retirement plans vary, depending on the type of account. An experienced legal and financial team can help you and your partner minimize the penalties and streamline the paperwork if you have several accounts to divide.