In any divorce, matters related to the division of property and marital assets can be confusing and anxiety-producing. Thankfully, provisions related to how assets are to be divided and distributed are largely dictated by state laws. For example, Minnesota is considered an equitable distribution state. Therefore, the property and assets of a divorcing Minnesota couple are to be split as equally as possible.
Of course each divorce is unique as are the types of property and assets a couple owns. To help ensure an individual receives an equitable share of marital property and assets, it’s important to become informed about potential financial and tax implications associated with the division of retirement accounts and the sale of a home.
When it comes to figuring out what to do with a previously-shared home, many couples decide to put a home up for sale. For couples who choose to sell a shared home, the proceeds from the sale will be subject to capital gains tax. However, a couple may qualify to receive a capital gains tax exclusion when selling a primary residence which equates to $250,000 for an individual or $500,000 if sold jointly.
The division of retirement account assets can be complex and often requires an individual to seek the advice of his or her divorce attorney or a financial expert. While at face value, two retirement accounts may appear to be of equal value, this is rarely the case. For example 401(K) accounts and IRA accounts are taxed differently. Likewise there are differing penalties and rules associated with withdrawing or transferring assets held in retirement accounts that can significantly impact the actual value of an account.
Dividing property and assets during a divorce settlement is one of the most important, yet maddening, aspects of the divorce process. Minnesota residents who are planning to divorce would be wise to obtain documentation of known assets prior to beginning the divorce process. An attorney can help answer questions and help ensure an individual is able to negotiate a divorce settlement that is advantageous.
Source: nerdwallet.com, “Divorce: Making Sense of the Confusion,” June 3, 2014