Death, Taxes and Divorce
If you are one of the 50% of married couples who’s union ends in divorce, you know it can be a scary, intimidating process. You may feel hopeless and afraid for the future you have dreamed of. Your world is upside down and you may wonder if it is still even possible to retire and live comfortably after all is said and done.
This worry might be even more intense the closer you are to retirement age. Without careful planning, this worry is well-founded, and you may end up paying far more in taxes than you need to.
The seven most expensive words in the English language: My CPA takes care of my taxes.
From my experience, most CPAs do a great job of filing taxes; but very few actually do any real tax planning. When divorce settlements are usually decided, none of the parties at the table are experts on the after-tax effects of the settlement. CPAs and Financial Advisors are left to pick up the pieces that the court has already ruled on.
Aside from investing behavior, income taxes are the greatest obstacle to most investors. There is never an age when you stop paying them. You paid tax on your social security as you put money in the system, and you will likely pay tax again on the money as it comes out.
The tax code and laws surrounding divorce are very complicated. It is not the job of the IRS or your attorney to show you how to properly structure your settlement to lower your taxes. It’s your job. If you don’t know how, you need to find a professional who does.