However, it is important to have additional members join in the process. At Westfield Mediation, LLC, the divorce mediators always recommend that an accountant review your final divorce agreement before you sign it so that you are made aware of any tax consequences in your agreement. For example, your retirement account that you are keeping is worth $100,000 and your spouse’s retirement account that s/he is keeping is also worth $100,000 and you each agree to keep the account that is in his/her name. But the accountant points out that one account is a 401(k), which is tax-deferred and the other account is a Roth IRA, which is tax-exempt. In the 401(k) scenario you will pay taxes down the road and in the Roth IRA scenario the money is tax free once the money is deposited in the account. At the moment of your divorce the accounts have equal value but you will eventually have to take money out of your pocket to pay taxes on the 401(k) account. You do not have to do this for the Roth IRA.
During the divorce process on the paper balance sheet it looks like your divorce is going well and you think all is balanced financially. You each have $100,000 in retirement funds, which you both worked hard to stash away each paycheck. It is important to take the extra step of having an accountant or tax expert review your divorce agreement so that you fully understand the tax implications of your agreement.
You are always going to pay taxes on these retirement accounts. It is just a question of when you pay these taxes, before or after contribution. These are important factors to consider when discussing assets during divorce mediation.
For more information on divorce and divorce mediation, please contact Randi M. Albert, JD, or Michelle Weinberg, M. Ed., Licensed Marriage and Family Therapist, at Westfield Mediation, LLC at 908.913.0373. View our website at www.westfieldnjmediation.com or email us at firstname.lastname@example.org.