Divorce is a complex and emotionally challenging process, and it is easy for important details to be overlooked. In Indiana, there are several aspects of divorce that frequently fall through the cracks, potentially leading to complications down the road. This blog will explore an in-depth look at three key areas that deserve more attention during divorce proceedings in the Hoosier State.
Many divorcing couples focus on obvious assets like houses and bank accounts but forget about retirement savings. In Indiana, retirement accounts acquired during the marriage are considered marital property and are subject to division. Retirement accounts include 401(k) plans, IRAs (Traditional and Roth), pension plans, 403(b) plans, and government retirement plans. Retirement accounts can be complex and may not seem as immediately relevant as other assets, especially for younger couples. However, they often represent a significant portion of a couple’s wealth.
Failing to properly address these accounts can result in significant financial losses. For example, if a 401(k) is divided without a proper Qualified Domestic Relations Order (QDRO), the account holder might face early withdrawal penalties and taxes. Obtain a complete inventory of all retirement accounts held by both spouses and determine which portions of these accounts are marital property. Work with a financial advisor to understand the current and future value of these accounts. Consult with an attorney who is experienced in drafting QDROs. Consider the tax implications of different division strategies (e.g., one spouse keeping the retirement accounts while the other gets more liquid assets) in divorce.
The division of assets and debts can have unexpected tax consequences that many couples fail to consider. This oversight can lead to one spouse bearing a disproportionate tax burden post-divorce. Selling a house may result in capital gains taxes, especially if its value has appreciated significantly. Transferring ownership of stocks, mutual funds, or other investments could trigger taxable events. Alimony is no longer tax-deductible for the payer or taxable income for the recipient. Determining which parent can claim children as dependents for tax purposes. Tax implications are not always immediately apparent and can be complex. Many couples focus on the immediate division of assets without considering long-term tax consequences.
What seems like an equitable division on paper may look very different after taxes are taken into account. One spouse might end up with a significantly higher tax bill, reducing the actual value of their settlement. Consult with a tax professional or financial advisor who specializes in divorce. Consider the tax basis of assets when dividing property and understand the tax implications of selling vs. keeping the marital home. Plan for potential capital gains taxes on appreciated assets and consider the timing of asset transfers and sales to minimize tax impacts.
After a divorce, many people forget to update their estate plans and beneficiary designations on various accounts. This oversight can lead to unintended consequences and potential legal disputes. Areas that can often be neglected include wills and trusts, life insurance policies, retirement account beneficiaries, bank account payable-on-death designations, investment account transfer-on-death designations, and health care proxies and powers of attorney.
In the emotional aftermath of a divorce, people often forget about these designations or assume they are automatically nullified by the divorce. There are potential consequences to consider, such as ex-spouses might inherit assets against the deceased’s wishes, children from a previous marriage could be unintentionally disinherited, and former in-laws may retain legal authority over health care or financial decisions. While Indiana law does revoke certain beneficiary designations upon divorce, it is not comprehensive.
By paying close attention to these often-overlooked aspects of divorce, Indiana residents can better protect their financial interests and ensure their wishes are properly carried out post-divorce. Always consult with experienced legal and financial professionals to navigate these complex issues effectively. The attorneys at Ciyou & Associates, P.C. have a comprehensive background in family law proceedings in Indiana. We are here to help you navigate your family law matter. This blog was written by attorneys at Ciyou & Associates, P.C., and this blog is not intended to provide specific legal advice or solicitation of services as this is an advertisement.
