What You Need to Know Before You Cash Out Your Retirement

By January 11, 2018 Articles

Cashing out your retirement isn’t something to consider lightly. Although many people choose to make early withdrawals from their retirement accounts to cover expenses, they can end up paying a lot more than they planned.

Many people choose to cash out their retirement during a divorce. For some, the money may be used to cover legal expenses while others may be trying to protect their own assets from the division of marital property.

Know When Can You Withdraw From Your Retirement Account

Retirement accounts have restrictions on the timing and amount of withdrawals that can be made. Before you cash out your retirement, you should review the terms of your account.

Consulting with a family law attorney can help you determine the best option to take when withdrawing from a retirement account during a divorce. Knowing when you can make withdrawals helps you avoid the penalties that can often be applied.

Retirement accounts that are deemed “marital property” may be divided according to a wide range of factors that family law courts consider.

The division of retirement accounts can be complex, and it can create a large number of tax issues. You need to work with an attorney with experience in handling cases that involve retirement accounts and other similar assets.

Limitations When Cashing Out Retirement Accounts

Cashing out your retirement early results in penalties. Divorce and the financial needs that can arise during a divorce case don’t exempt individuals from these penalties or taxation.

In addition to facing a 10 percent penalty for early withdrawals, the money you withdraw may be taxed, further reducing the amount you actually receive.

The taxation of retirement funds depends on the type of contributions that were made. Pre-tax retirement accounts are only taxed when the money is withdrawn.  

Some retirement accounts may waive penalties in cases that involve specific medical costs or college expenses.

When Withdrawals Are Allowed

An individual retirement account (IRA) is created using pre-tax income. This allows individuals to receive tax benefits from the annual contributions they make.

As a result, account holders are expected to keep their IRA funds in place for an extended period of time.

Cashing out your IRA before the age of 59 ½ results in the 10 percent penalty along with federal and state income taxes.

With an IRA, you can avoid these penalties if the money is being used to buy a first home, cover health insurance and medical costs, and provide financial resources in the event of a disability.

Roth IRAs are funded with after-tax income. This gives you more flexibility in making early withdrawals. Account holders must understand the difference between annual contributions and their earnings.

Your original contributions may be cashed out without any penalties, but this doesn’t apply to the earnings in your account. You can also make withdrawals of your contributions for any reason.

But you need to wait at least 5 years from the date of the contribution until it can be withdrawn.

In divorce, funds in a retirement account may be transferred to a spouse in cases where the assets are divided. The transfer must be included as part of the divorce decree and can only be made once the divorce is finalized.

Any contributions made during the marriage are viewed as marital property by the courts. Your attorney can help you develop the legal strategies to protect your financial wellbeing in divorce.  

Understanding the implications related to cashing out your retirement account early is the first step in avoiding costly issues and complicated divorce proceedings.

The terms of retirement accounts will vary, and taking the time to understand what contributions you can and cannot make ensures the best outcome in your divorce.

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Paying More Than You Can Afford in Spousal or Child Support: Protecting Your Legal Rights in Divorce

By December 14, 2017 Articles

Spousal support is a common cause of disagreements in divorce cases. Both parties are looking after their own best interests, making it difficult to achieve a satisfactory resolution for divorcing couples.

Although spousal support can provide benefits to the wellbeing of the entire family, in cases where the paying spouse can’t afford alimony, it can be a source of long-term negative impacts on their personal and professional lives.

If you’re facing a spousal support claim, should you have to pay more than you can afford? Understanding spousal support and how to protect your rights gives you the legal strategies you need to protect your financial wellbeing.

How Much Support Are You Going to Pay?

Spousal and child support are calculated according to different formulas used by state family law courts. Court judges can use them to determine how much financial support will be granted to a spouse.

The current incomes of each spouse, the amount of time spent with their children, and other important factors are considered. Support already being paid or received from a previous divorce can also influence the court’s decision.

Additional or irregular income from employment may be considered in a divorce case as well as the age of your children and the future employability of a spouse.

Knowing the factors used to determine spousal support helps you gather and present the evidence that ensures you won’t pay more than you can afford.

Reducing the Spousal or Child Support You Pay

The evidence you provide can protect you from having to pay more alimony than you can afford. You may need to provide a full disclosure of your financial history.

Courts can’t require you to pay more spousal support than you can afford. Your monthly income and expenses will help judges determine an appropriate amount for alimony or child support.

But judges may also use their own discretion if they have a justified reason to do so. This means that you may reduce the amount of support you'll need to pay by demonstrating that you already have additional expenses that go beyond basic support.

This is especially common in cases that involve children with special needs. If one parent has primary custody of the child, he or she may need additional financial support to cover the costs of medical care and other expenses.

Submit your financial information in a clear and well-organized manner. This makes it easy for the courts to understand the reasons why the spousal or child support you pay should be reduced.

Also, if the amount that’s calculated according to the court’s guidelines exceeds that which is actually needed, a court judge may reduce the support that’s granted.

Protecting Your Legal Rights and Financial Future

Making your way through the complexities of spousal or child support requires the right legal resources. Consulting with an experienced family law attorney ensures that your legal rights are protected along with your financial interests.

Your attorney can help you determine what evidence you should gather and present to the court. This saves you time and other limited resources by helping you present the most compelling evidence that will reduce the spousal support you have to pay.

If you’re facing new financial challenges and need to reduce an existing alimony order, your attorney can help you review the divorce judgment to determine the conditions of the previous order.

You can also work with your spouse to establish an agreement that meets both of your needs. You may choose to use a third party resolution through mediation and other means.

Post-judgment modifications and other legal strategies can also be used to ensure that you don’t pay more spousal or child support than you can afford.

Establishing a fair amount for your spousal or child support agreement gives you the ability to meet your legal responsibilities while protecting your financial future.

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Why You Shouldn’t Handle Your Own Divorce Negotiations When You Have Multiple Assets

By November 30, 2017 Articles

Protecting assets is one of the primary goals for divorcing couples. There’s a wide range of personal and business-related properties that can be subject to equitable distribution.

Although assets that existed prior to the marriage will remain in your possession, those that were acquired during the marriage may be valuated and divided according to the court’s decision.

Trying to handle your own divorce negotiations can lead to common mistakes and significant losses. This is especially important for couples that have multiple assets to consider.

The following will help you understand how to protect your assets in your divorce so that you can make the best decisions for your needs.

Common Negotiation Mistakes in Divorce

In many cases, emotional attachments to marital assets make the divorce process more difficult. Individuals may struggle to give up their residence, collectibles, automobiles, and other items.

But emotional reactions get in the way of your ability to make the right decisions for the long term. Some individuals may choose to keep a home without realizing that they may not be able to afford it on their own once the divorce has been finalized.

Retirement accounts, insurance policies, and other factors need to be updated in response to the decisions made by the courts. Spouses must consider making any necessary changes to the beneficiaries named in these policies after a divorce.

Family law attorneys help clients make these changes at the right times to avoid any potential problems that could impact how assets are distributed in the future.

Divorce settlements can be insured in order to provide long-term protection for spouses who are granted alimony and other forms of support.

Making sure that your spouse’s life insurance policies cover your alimony or child support should your spouse pass away or be disabled is critical to you and your family’s wellbeing.

Financial Considerations in Divorce

Assets can be sources of additional expenses. For example, a home may require you to continue paying the mortgage, taxes, and ongoing maintenance or repairs.

Negotiating your marital assets without the help of a legal professional may cause you to overlook the additional costs of keeping certain assets after a divorce.

You must consider joint tax filings that require both parties to pay their share. Your attorney may be able to reduce the amount of taxes you need to pay depending on the factors related to your divorce case.

More importantly, you and your spouse may work together through your attorneys to reduce how much taxes must be paid. You may also need to estimate your current expenses when filing a case for spousal support.

The right legal and financial professionals can help you create a budget that demonstrates your need to maintain certain assets and receive any support that you deserve.

You may also need to pay taxes on those assets that are granted to you in a divorce. Stock assets and other investments must be valuated in order to determine how much should be distributed to each spouse.

This can be a lengthy and complex process for spouses who choose to handle their own divorce negotiations.

Getting the Right Settlement and Asset Protection

Settlement proposals may or may not meet your needs. Handling the divorce negotiations on your own can cause you to accept an unfair settlement.

A family law attorney helps you evaluate any proposals that are offered to you and the ways in which they can impact your financial future. Future costs related to medical expenses, retirement, inflation, and childcare will factor into the fairness of any settlement proposal.

The first step to negotiating your multiple assets in a divorce is to consult with a skilled family law attorney. Together, you can determine the best legal options to protect your rights, assets, and financial future.

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Protecting Your Lifestyle During and After Divorce

By November 9, 2017 Articles

The loss of financial resources impacts your personal and professional life. In some cases, a spouse may take steps to negatively impact the financial well being of their partner.

Spouses who aren’t working or earning significantly are the most vulnerable in contested divorce cases.

These cases should seek to resolve disputes amicably while avoiding costly and lengthy proceedings if possible.

Spousal support or alimony is often an issue that spouses don’t agree on. In many marriages, one spouse may be financially dependent on the other.

Working with anattorney protects your financial well being, lifestyle, and future. You’ll understand your rights under the law and be presented with the best options for your needs.

Protecting Your Lifestyle With a Legal Professional

Spouses may try to minimize the amount of spousal support that’s granted to the other party. You’ll have to demonstrate your financial needs and history of your spending in order to receive the support you deserve.

Gathering and presenting evidence is critical to achieving a positive outcome in your divorce case.

Working with an experienced attorney is the first step in understanding your rights and determining the best options for your legal needs.

There are many factors that determine the amount of spousal support you receive. These include your spouse’s current income, your ability to earn future income, and the standard of living established during the marriage.

Contributions from each spouse and the needs of each spouse and the children will also impact the court’s decision.

You will need a detailed analysis of your daily expenses and the spending history during the marriage.  Your attorney will use bank statements, credit card statements, statements from investment funds, tax filings, and other financial documents to determine your standard of living and help you establish proof of your needs for alimony.

Providing this information can be a complex and lengthy process. Your attorney will help you gather the information needed to secure the spousal support that allows you to maintain your lifestyle.

The more information you provide, the more likely you are to have the courts decide in your favor.

Inaccurate or missing financial records can hurt you in the end. So ensuring that you submit complete information according to the needs of the court is essential to the success of your divorce proceedings.

Want to know more about alimony and protecting your lifestyle?  Please contact the BKBM Family Law Group and ask for Charles Medlin, Erin Stone or Marilyn Kapaun at (770) 391-9100.

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