For most Louisiana residents, there is no way around losing financial ground when ending a marriage. The prospect of supporting two households with the same resources that used to support one is often daunting, which leads many couples to try to get through an uncontested divorce on their own. The problem is that if certain aspects of the divorce are not handled properly, it could cause a financial nightmare for the parties.
This is especially possible when it comes to dividing retirement accounts. If they are not properly divided, the tax ramifications can be costly. Many Louisiana residents may not be aware that some retirement accounts such as 401(k)s require a qualified domestic relations order to split them without incurring tax penalties, and those who do know about them may not draft them properly.
Monetary losses could also be incurred depending on how distribution from a retirement account is done. In some cases, transferring the amount is preferable over cashing it out, and vice versa. Then again, it might be better not to divide the retirement account at all. It may be more advantageous for both parties to exchange assets instead, but even this needs to be done with care since the value of two assets is rarely exactly the same because other considerations could affect their true value.
Ultimately, it would more than likely be better to enlist some advice and assistance even in an uncontested divorce. Neither party wants to look back in a year, two years or 10 years and realize that a major mistake was made that ended up being costly. With the right help, both parties can walk away from the marriage satisfied that every angle was considered, the appropriate divisions were made and that the paperwork was correct.
Source: Reuters, “Your Money: Splitting retirement accounts is tricky for DIY divorce“, Beth Pinsker, Nov. 6, 2017