Knowing What Your Assets Are Really Worth
Heading into a divorce, it is necessary to itemize which assets are pre-tax and which assets are post-tax.
An IRA or 401(k) is generally considered pre-tax money. When the parties consider the value of this asset they need to figure out a method of computing a post-tax value if they are going to be able to ascertain if it is an equitable distribution. For example, if a party has $40,000 in an IRA and the other party has $40,000 in the bank this may not be an equal division for one party to keep the IRA and the other party to keep the bank account. If a person keeping the IRA were to liquidate the account today, it may be subject to a penalty plus may be subject to ordinary tax on the money. The person who has the money in the bank account may incur no penalty and no tax. Therefore, depending on the tax bracket of the person holding the IRA, it is conceivable that the present value is approximately $26,000 not $40,000. Rosenthal | Thurman | Lane is able to assist our client s in sorting through the different types of assets, their value and their tax implications.
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