Divorce has been increasing among people over 50 in Texas and the rest of the United States over the past couple of decades. When couples decide to divorce when they are close to retirement, they might encounter more complex issues than younger people who go through divorce. There are multiple mistakes that older people should avoid when they end their marriage.
Ignoring tax consequences
There are several ways older adults can incur tax consequences when they divorce after age 50. One of these ways occurs when they divide retirement accounts. IRAs and 401(k) accounts must be divided with a qualified domestic relations order when the spouses are younger than 59 1/2. If the spouse who owns the retirement account simply withdraws the funds and gives them to the other spouse, the account holder will face an early withdrawal penalty, and the withdrawal will also be added to annual income and potentially push him or her into a higher tax bracket. If the receiving spouse is younger than 59 1/2 when they roll the money over to an IRA and withdraw it, they will also face early withdrawal penalties and other taxes.
Keeping the house
While many divorcing spouses are attached to the family home, it might not make sense to hold onto it. It may be too expensive to keep up after a divorce when the spouse who remains in the home has only his or her own income instead of two incomes. It might be a better idea to consider selling the marital home and splitting the proceeds instead of one spouse remaining in the home.
There are many other mistakes people aged 50 and older make when divorcing. Working with an experienced divorce and property division lawyer might help these individuals avoid making some critical errors.