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Complications in divorce for older people

People in Indiana who are over the age of 50 and getting a divorce might be concerned about retirement. However, there is a number of other financial issues they should be aware of as well.

Starting with divorces finalized in 2019, alimony will not be tax-deductible or tax-payable. Some attorneys expected this to lead to a rush to get divorced before the end of 2018, but this does not appear to have happened. However, one important implication is that since alimony is not taxed, it cannot be counted as income. Since it is not income, it cannot be placed into an IRA or Roth account.

Some couples may agree to an arrangement for property division in which each person takes certain assets that have the same value. It is important for them to account for the tax implications. For example, a Roth account may actually be worth more than an IRA or 401(k) with the same dollar amount since taxes are already paid on the Roth account. Capital gains tax could reduce the value of some assets if they are sold. A spouse who takes the home in a property division agreement should be cautious about falling into debt to maintain it. Selling it could be the best option. When dividing pensions and some other assets, people should have certain legal orders in place to avoid tax penalties.

Complex property division in a divorce can involve all of these issues plus additional ones, such as having to get an art collection appraised before it can be divided. Other complexities could arise if one person believes the other individual is hiding assets. If both people own a business together, they may need to decide whether one will buy the other out, they will sell it or they will try to continue running it together after the divorce.

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