Understanding Post-Decree Transfers: Navigating Asset and Debt Division After Divorce

Understanding Post Decree Transfers

Divorce is a complex process, and one of the most critical aspects division assets debts. Post-decree transfers ensure that both parties fulfill terms divorce settlement are divided equitably.

In today’s blog let’s explore the different types of assets involved, how these get divided, and best practices to avoid common pitfalls. In today’s blog let’s explore the different types of assets involved, how these get divided, and best practices to avoid common pitfalls.

Types of Assets You are Typically Dealing With

When you are dividing assets you are dealing with 3 types of assets:

  1. Qualified Assets: These include private pensions and traditional 401(k) plans governed by the Employee Retirement Income Security Act (ERISA)

  2. Tax-Advantaged Assets: This category covers Individual Retirement Accounts (IRAs), Roth IRAs, and small business retirement accounts like SIMPLE IRAs and SEP IRAs.

  3. Non-Qualified Assets: These encompass everything else, including real estate, personal property, and various investment accounts.

As a result you are dealing with the following regulations

  • ERISA: Governs private plans for private corporations, including pensions and 401(k) plans.

  • Individual Retirement Accounts (IRAs): This includes small business retirement accounts like SIMPLE IRAs and SEP IRAs in addition to IRAs and Roth IRAs

  • Federal and State Laws: Cover civil and military pensions, including TSPs, 457s, 401(a), 403(b), and various state and federal retirement plans.


Also you are dealing with IRS Code § 1041: Ensures that transfers of property between spouses or incident to divorce are generally not taxable.

This specifically means that:

  • As a general rule no gain or loss is recognized as part of a transfer

  • The transfer is treated as a gift, meaning the cost basis is also transferred with the asset

  • The transfer of property needs to happen within 1 year of the divorce or related to the divorce

  • If a spouse is a nonresident alien the preferential tax treatment does not apply

  • In transfers where the liability exceeds the basis- the total basis will transfer

So with those facts laid out, how do you split up the assets (and debts)?

Let’s start with debt first. For Debt Obligations you need to ensure that debts that are currently titled in both spouses’ names are refinanced or retitled to avoid future liability. Typically most lenders do not recognize that divorce decree states one party is responsible for the debt repayment and will go after all of the parties listed on a debt. Make sure it gets retitled or refinanced- this is something that will come up to haunt or cause issues and result in people having to go back to court or declare bankruptcy.

For Assets, it depends on the type:

  • Qualified Assets like 401(k)s and pensions need a Qualified Domestic Relations Order (QDRO- read more on them in this blog post here); you can also use a QDRO to divide 403(b)s, 457s, and 401(a)s

    • Be aware that TSPs require a Retirement Benefits Court Order (RPCO)

  • Military Pensions: Require a Military Pension Order (MPO) and specific elections for survivor benefits.

  • Tax-Advantaged Assets- Like an IRA and Roth IRA you do not need a QDRO. Be aware some custodians do require a Domestic Relations Order (DRO)

    • Be aware that if a Simple IRA is less than 2 years in place, even with divorce, there would be a 25%penalty to withdraw
  • Non-Qualified Assets- Depending on the asset it’s as easy transferring the title (with the house or transferring individual stock and bond positions (brokerage accounts)

You mentioned Common Pitfalls and Best Practices?

Yes- this can get messy fast. Let’s pause for a second to remind you that you can hire professionals to help you with this. You want to find a professional that specializes in divorce and has experience with what you are trying to accomplish. Ones that come up often:

  • Certified Divorce Financial Analysts

  • Family Law Attorneys

  • Certified Divorce Lending Professionals

  • Certified Divorce Real Estate Experts

Okay! Let’s chat about Common Pitfalls and Best Practices

  1. Deadlines and Documentation: Clearly specify deadlines for asset transfers and ensure comprehensive documentation to avoid future disputes

    a. Examples of deadlines that need to be spelled out: The house will be listed by (name a date) with price deductions after (name a date); or the debt will be refinanced by (name a date). You also want to ensure you specify what will happen if a deadline is missed so you are not going back to court to argue about a missed deadline.

    b. Also for ensure you have comprehensive documentation when it comes to valuations, transfer agreements, etc.

  2. Engage Experts: Work with financial advisors, tax professionals, and real estate experts to navigate complex transfers and ensure accurate valuations.

  3. QDROs: QDROs are a huge source of mistakes in divorce. Here are the most common that come up:

    a. QDRO requires payments the plan does not allow. Different plans have specific rules and requirements. Also check for early or late retirement benefits- sometimes there are incentives to do so and not designating those to be divided can be a costly pitfall.

    b. The QDRO does not specify what happens if the employee dies. There are times where the Employee does not put survivor benefits into their plans and the spouse gets nothing.

    c. Timing- the QDRO should be entered into the court at the same time as the judgement of divorce whenever possible

Navigating post-decree transfers requires careful planning and a thorough understanding of the regulations and laws involved. By understanding the assets, laws and regulations, as well as avoiding the common pitfall you can set up both parties on a better path post-divorce.

I hope this blog provides an overview of post-decree transfers and helps you navigate this complex process with confidence.

Stay Informed. Stay Strong. Stay Confident.

Brianna Beski is a financial advisor and CDFA at Raymond James, based in Colorado. She focuses on helping people have confidence in their financial futures. For the rest of the story, please visit her website or email her at brianna.beski@raymondjames.com.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Brianna Beski and not necessarily those of Raymond James. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors we are not qualified to render advice on tax or legal matters. Raymond James does not provide tax or legal advice. Please consult your own legal or tax professional for more detailed information on tax issues and advice as they relate to your specific situation.

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