What kind of professional do I need?

August 13, 2020 10:37 AM

I have to transfer a combination of 401k contribution and cash to my wife during a divorce. It's a very significant sum. I have a 401k, equity in a house, and some savings, and she's amenable to paying some in installments. I'd like to sit with a professional on a limited-time, fee-for-service basis and figure out the best way to do this with the least taxes and penalties. Who do I want to talk to?
posted by ftm to Work & Money (5 answers total)

I think most Certified Financial Planners would be able to help but there's an additional designation of Certified Divorce Financial Analyst and one of those folks would likely be an even better fit. (And if not, they'd be able to point you to someone who is. It might need to involve a tax professional.)

https://institutedfa.com/what-cdfa-1/
posted by small_ruminant at 10:47 AM on August 13, 2020

The Certified Financial Planner knowledge base is a bit general for this. There are accountants who specialize in these matters. Consult with your divorce attorney for one they would recommend to you.

Wherever your 401k is, find someone there who knows what they’re doing to execute these transactions smoothly. Fixing errors in these matters is enormously time consuming and difficult.
posted by thenormshow at 10:57 AM on August 13, 2020 [1 favorite]

Your third party administrator for your 401k should be able to help with that portion, so that it is handling within IRS guidelines.
posted by domino at 11:17 AM on August 13, 2020

I disagree that a tax planner is the best person for this. Tax planners miss a lot of the nuance in, say, the transfer of value inherent in a tax deferred account vs a taxable account, and the transfer of value in a real estate transfer that takes the property tax base into account versus one that doesn't.

In my experience, what tax planners are good at is figuring out what the tax results of certain actions are likely to be. However taxes are not the only thing to consider in divorce distributions of monetary assets. Tax planners often let the tax tail wag the dog.

That said, there are CDFAs who are also EAs (Enrolled Agents) which are tax professionals. So you may be able to find a two-birds-one-stone professional. They cost more, usually (but not always.)
posted by small_ruminant at 12:00 PM on August 13, 2020 [1 favorite]

While I do not have a recommendation on a particular type of professional, I would ask them to check into whether the tax implications will be different if you transfer the funds before you are divorced vs. afterward. I am going through a divorce and transferred some (minor) assets to my soon-to-be-former spouse while we were still married since a spousal transfer is not taxable (this may vary by where you are located, but in my location it is not). If your asset distribution has to be done after the divorce is final because it requires a divorce decree to actually trigger the asset transfer, this will not apply to you.
posted by bedhead at 1:03 PM on August 13, 2020 [4 favorites]