Question: My husband (55) and I (53) are scheduled to be divorced soon based on a property settlement agreement, but I am having a hard time pinning my lawyer down about what it will mean to me financially. My husband is keeping our successful plumbing business, and I am receiving the house, some stocks, the majority of my husband’s IRA’s, and some alimony. Because the alimony payments will not cover all my expenses, my lawyer tells me that the IRA’s will come to me tax free and that I will be able to supplement this amount by taking withdrawals from the IRA’s because my husband is over 55. I am concerned that if I do this, I will have nothing left when I really need it. Is there something I am missing?

Answer: Yes, accurate advice. First of all, by correctly rolling over your husband’s IRA’s into your IRA by way of a trustee to trustee transfer, there will be no immediate taxes; however, when it comes to withdrawals, unlike qualified retirement plans where distributions can begin at the date of retirement, traditional IRA’s are governed by what are known as “minimum distribution rules.”

Generally speaking, to avoid penalties, you may not begin taking distributions from a traditional IRA earlier than age 59 1/2 or later than April 1 of the year following the year in which you attain age 70 1/2.

If you do take withdrawals from your IRA before you reach 59˝, you will be subjected to not only income taxes, but also a ten percent penalty tax unless: 1) you are permanently and totally disabled; 2) you are being reimbursed for higher education expenses paid by you for your education or that of your spouse, child, or grandchild; 3)you, as a first-time homebuyer, are reimbursing yourself for up to $10,000 per year for purchase, construction and closing costs; or 4) you take these payments in substantially equal periodic installments over your life expectancy.

It appears to us that the only possible fit for you would be taking the payments in substantially equal payments over your life expectancy in which case you would be required to take the payments for five years or until you reach 59 ˝, whichever is greater. In your case, you would be required to take the distributions for six and one half years.

At stake here is your future financial security, so you should get good advice before you complete this transaction. We suggest that you contact a certified public accountant and qualified financial advisor to learn about your options.

Financial planning is an integral part of divorce planning; however, all too often, financial professionals are not included in the planning process until the case is over. In our view, this is a mistake. We believe that qualified financial and tax professionals should be made a part of the process from the beginning in order to make sure that projected budgets and returns on investments are attainable based upon proposed settlements.

SoloFact: Be sure to change all beneficiary designations on life insurance, IRA’s, and pensions after divorce. Not removing a former spouse as beneficiary may result in the former spouse receiving payment of these benefits at your death. Even if your former spouse signs a waiver and even though state law may automatically revoke a spouse’s benefits at divorce, such is not controlling where your benefits are governed by federal law.