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CPA can help with divorce division of valuable retirement assets

Retirement accounts, pensions, 401(k)s and the like may be most valuable assets subject to division under Arkansas' equitable distribution standard for divorce. As we have observed before, "equitable" does not necessarily mean a 50-50 split of things. It is up to the court to make the final call on what it considers fair.

Because of the way many retirement plans are set up, they can't simply be liquidated and the proceeds divided. Laws restrict how these funds are distributed to ensure they are mainly directed toward retirement. If those rules are ignored, costly tax penalties can result, unless a qualified domestic relations order (QDRO) is obtained from the court.

QDROs are those vehicles by which the court informs retirement account managers that, due to a divorce, the assets of a given account need to be separated between two payees. Typically, any QDRO will include specifics on how the funds are to be divided to meet equitable distribution requirements.

It's worth noting that depending on the situation, some of the assets could be ordered liquidated for purposes of covering child support, spousal support or meeting the property rights of some other dependent connected with the dissolution.

Considering all the potential players with a stake in what happens it makes sense that caution needs to be taken to see that affected assets are handled strategically. In this regard, many family law practitioners appreciate the contribution that other professional counselors, such as certified public accountants, deliver to the property division effort.

CPAs can provide guidance on how a client may be affected if portfolio assets are simply divided down the middle or selectively separated out. For example, if one of the spouses is in a position where stock awards from an employer are a factor, a more refined approach to division might be best. A CPA can also help review distribution plans to spot and avoid or mitigate potential taxable events.

Faced with the reality that the courts can exercise significant discretion in determining what is equitable in property division, the value of working with an experienced attorney who can make a compelling argument for a client's interest becomes clear.

Source: accountingtoday.com, "The CPA's Role in QDROs," Roger Russell, July 21, 2016

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