Discount for splitting qualified money in divorce

[silvor]

When splitting assets in a divorce, how much would you “discount“ the following because of taxes?

IRA/401k
Roth IRA

I am thinking a lot of the Roth is just like a cash account because of the contributions. At this point I believe the Roth is about half contributions half gains.

Let’s just figure 100k income, 2 dependents. So standard deduction is $16,350

401k, IRA, HSA maxed, but it’s offset by distributions from Inherited IRA.

One spouse may want the non qualified money at a discount. It’s mostly cash and no gains. But what is fair split?

 

[Sunset]

Good luck.

Fair is what some lawyers and a judge decide based on Fed/State laws and it's not always fair by a long shot.

 

[SecondCor521]

Whatever the two spouses can agree to in mediation and a judge signs off on.

If they can't agree, whatever the better lawyer persuades the judge to do.

FWIW, we didn't take future taxes into account in our split. It was 50/50 based on nominal value.

 

[COcheesehead]

Went through this 20 some years ago. It’s whatever the couple can agree on that appears to be nearly equal. I traded the value of my business for her getting the house. 20 years later, I got millions when I sold. She got hundreds of thousands.

 

[TheWizard]

Went through this 20 some years ago. It’s whatever the couple can agree on that appears to be nearly equal. I traded the value of my business for her getting the house. 20 years later, I got millions when I sold. She got hundreds of thousands.

Just curious: what was the nature of your business?
A cheese import company, perhaps?

 

[COcheesehead]

Just curious: what was the nature of your business?
A cheese import company, perhaps?

The cheesehead is in reference to my birth place of Wisconsin.
My business was of a different nature.

 

[SecondAttempt]

You might hire a CPA to value the accounts. I suspect there are standard ways to do this.

When I got divorced a few years ago we had roughly equal tax-advantaged accounts so we just agreed to keep our own and avaoided the whole issue.

When my partner got divorced she had to hire someone to value her state pension. It cost about $400.

 

[levindb]

split each type equally...no discounts:

1. pretax - 401K/IRA
3. after tax - savings/brokerage accounts
3. tax free - Roth

 

[ERD50]

split each type equally...no discounts:

1. pretax - 401K/IRA
3. after tax - savings/brokerage accounts
3. tax free - Roth

Right - even if the overall split is not 50-50, take an equal split of all accounts and this 'problem' doesn't exist.

If you are trying to equalize for different tax brackets, I'd say don't - that's each person's [-]problem[/-] situation.

-ERD50

 

[W2R]

I don't know. When I divorced my late ex, back in 1998, he and I decided that I got my clothes, my books, my terrible junk car, and a sofa, and he got everything else including the house, the furniture, the boat, his entire 401K, and his fancy conversion van.

Sounds disastrous for me, I know, but it seemed fair at the time since the divorce was my idea. It really wasn't that hard to recover from it. So much of divorce (and often marriage, too!) is just power games IMO.

 

[Mark1]

I am thinking a lot of the Roth is just like a cash account because of the contributions. At this point I believe the Roth is about half contributions half gains.

I don't have an good answer, but I believe that amount of Roth contributions verses gains is irrelevant, so I would remove that from the equation.

 

[CyclingInvestor]

We used the "I assess you choose" method. I assigned a value to the house / each 401k / IRA and other assets, she got to choose half. Worked well enough to use a legal-assisted filing service (<$1000) instead of hiring lawyers.