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Considering tax implications an important part of divorce process

On Behalf of | Aug 14, 2020 | Divorce

Property division remains one of the most emotionally contentious aspects of the marital dissolution process. It can also be one of the most confusing parts of the divorce process in Virginia. Unfortunately, the wrong property division decision can negatively impact a divorcing individual’s life in the years ahead.

Let’s look at an example of what can happen when the wrong asset division decision is made. Two spouses are getting a divorce and have two Individual Retirement Accounts: a Roth one and a traditional one. Each account has $200,000 in it. One spouse decides to keep the Roth account, whereas the other spouse keeps the second one. Do they both walk away with $200,000?

The truth is, their assets do not have the same value. The Roth account holder will not have to pay taxes on this money in the future, as taxes have been paid on it already. However, the traditional account holder will have to pay up down the road. In fact, this person could end up losing a third of the money, depending on which tax bracket he or she falls under at that time.

Failing to understand the tax implications of the decisions made during the divorce process can prevent an individual from reaching his or her retirement goals or other financial goals. This is why consulting a divorce attorney in Virginia is so crucial. The attorney can walk a divorcing individual through various asset division scenarios and help him or her to make the most expedient decisions possible. The attorney’s main aim is to pursue an outcome that is ultimately in the client’s best interests.

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Attorney Harvey S Lutins