Understanding how to handle an IRA in a military divorce

In an effort to achieve a swift and less contentious divorce, some Florida couples will choose to process their divorce on their own, without the assistance of an attorney. The shared goal of a collaborative divorce is an honorable one, and deserves respect. However, reaching the end of a military divorce without serious error requires a particular set of skills. This is where legal services come into play, because even the most collaborative couples can still make mistakes that can cost them in the long run.

Handling an IRA is a good example of an area where errors can easily be made. For example, treating the funds in an IRA like a personal bank account can lead to a number of negative consequences. Many spouses feel that their IRA is an asset that can be dissolved like any other. During a divorce, they may cash out those savings to cover other expenses, such as furnishing a new apartment or paying off a credit card.

The problem arises due to the fact that cashing out an IRA triggers a significant tax penalty. That cost could be avoided by rolling the funds into another retirement savings vehicle. That would leave the funds in place for use when retirement arrives, and would also avoid losses due to an additional tax. However, once this type of step is taken, there is nothing that can be done to reverse the action.

Working with a divorce attorney is not just a choice made by Florida spouses who are gearing up for a fight. It is also a wise move for any couple who want to make the best possible choices in regard to the division of marital property. It should also be noted that the services of a family law attorney are often far more affordable for couples who have already worked out the bulk of issues in their military divorce. Having an attorney at least review those decisions prior to making the matter final is a great way to achieve a positive divorce outcome.

Source: Forbes, "IRA Withdrawal Penalty A Cost Of Do-It-Yourself Divorce", Peter J. Reilly, June 30, 2017

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