Money advice concerning division of investments in anticipation of divorce
November 12, 2011 6:08 AM   Subscribe

Who or what should I be searching for as I attempt to get advice on how to equitably divide mutual funds, IRAs and TSP accounts in anticipation of a separation/divorce agreement?

In the process of a divorce and we are using a mediator. I don't feel like I'm getting accurate or knowledgeable advice on the equitable distribution of our many (we never really knew what we were doing) mutual funds, individual IRA accounts, and some Thrift Savings Accounts. I don't want to look at the total value of our investments and try and even it out that way because there are some big differences in how they were funded, the mutual fund performances and their current cost basis. I, essentially, know enough to suspect these things matter (especially since some may have to be liquidated to fund this transition time). I don't know who or what to search for because it's not really investment advice but rather advice about division of assets in the fairest way and in a way that avoids the biggest tax burden. A forensic investment specialist who knows something of taxes? A forensic tax accountant who specializes in simple investments? Something else? Also, if you have any specific recommendations or an idea of cost (live in Washington DC metro area), I'd appreciate that information as well. Thanks very much!
posted by notcomputersavvy06 to Work & Money (8 answers total) 2 users marked this as a favorite
 
I'm not sure it matters how they were funded. Assets are what assets are. It should be pretty easy to calculate what the net gains are on the positions and make sure there is an equalizing payment if one of you ends up with a bigger gain position than the other. Assuming everything has been held for a year then relative incomes don't matter either as cap gains taxes are not progressive. If their are assets held for less than a year in taxable accounts the you need to have a discussion about how best to deal with the tax issues. But even then, assuming you decide they should be liquidated have the person with the lowest marginal rate take the gain and and factor the taxes paid into the split of assets.
posted by JPD at 7:27 AM on November 12, 2011


ETA: in other words you really don't need a specialist to do this. It would be a waste of money.
posted by JPD at 7:28 AM on November 12, 2011


Recall that gains or losses within IRAs are not taxed or deductible, and are somewhat inaccessible before age 60 (approximately). If they are somewhat unequal, one party may prefer current money to deferred money, and some tradeoffs could be done.
posted by megatherium at 9:18 AM on November 12, 2011


you can also split assets in tax deferred retirement accounts without incurring taxes or penalties
posted by JPD at 9:21 AM on November 12, 2011


I believe you can only effect these splits once you have a court order. In general retirement assets are not transferable.

As for whose they are- that's trickier and your mediator should know the rules. For instance, in some states, it matters if the money went in before your marriage or after. However, I live in a community property state and Virginia is not one, so the divorces I'm familiar with likely won't do you any good.

Basically- your mediator should know these rules, and if s/he doesn't, at LEAST talk to an accountant.

If you are gay and legally married, dividing assets in a divorce is even trickier, depending on the state you're in.
posted by small_ruminant at 11:29 AM on November 12, 2011


I believe you can only effect these splits once you have a court order.

yes, but its the sort of stuff the mediator can take care of for you.
posted by JPD at 12:34 PM on November 12, 2011


In terms of what equitable distribution means in the jurisdiction where you're divorcing, you need someone who knows the local law. Your mediator ought to and if s/he doesn't, you need to either find another or get help from a lawyer 'on the side'. Understanding the default division of property laws for where you are may help you come to a mutual agreement on what you want to do.

There are companies who specialize in making calculations as to the 'marital value' of a retirement account - if it's not straightforward. A local divorce lawyer should be able to recommend some. Or subcontract it.

In terms of tax implications, an accountant with some experience with divorce should be able to help. But to me it sounds like what would be the most simple useful step for you is to find a divorce lawyer who knows about taxes (not all do) and/or who works with an accountant already. It sounds like your mediator can't handle this on her own. Whether to keep him as an aid for facilitating conversation, while getting legal advice on the side, or whether to replace him altogether with a lawyer with useful expertise, is your call.

I disagree with JPD. I think this could well be worth the money to get this done right in a way that you feel comfortable that your rights and interests are being respected.
posted by Salamandrous at 6:30 AM on November 13, 2011 [1 favorite]


I am in the end stages of a mediated divorce myself, and the only way to sort out your situation is an experienced lawyer for each party and perhaps an accountant. The laws vary considerably from state to state and at least here in GA the judge has a good bit of discretion in making an equitable division of assets. For example, one of the big assets in our marriage is my retirement account. Different types of accounts have different rules and in my case the type of account I have (a 403b) cannot be divided with a QDRO. During mediation both lawyers and the mediator (a retired judge himself who is evidently very much in demand as a mediator) agreed that if it went to trial the judge could decree that my wife was entitled to her share of the account, but wouldn't get it until my retirement when the funds were distributed, that I might have to find a way to come up with the full amount myself right now, or something in between; in our case she agreed to take a lower amount in cash right now thus avoiding the expense and uncertainty of letting a judge decide. And that was just one account; it sounds like your situation is far more involved. I would suggest getting as much documentation as you can (statements from the beginning of your marriage on, for example) and let your lawyer guide you from there. An experienced family law attorney will have a host of accountants and other specialists in their Rolodex and can get an answer to specific questions quickly. In our case a tax question came up during mediation and a quick call to an accountant got it answered in a matter of minutes (and about $100.00). If your attorney does not have that kind of expertise it may be worth finding one who does.
posted by TedW at 7:02 AM on November 13, 2011


« Older Fresh and Fruity in the UK   |   I have some old electronic car keys. What can I do... Newer »
This thread is closed to new comments.