Do We Pay Taxes if We Divorce and Split the 401(k)?

Divorce turns a marriage into a business transaction.

That’s an unfortunate but true statement.

A big part of that business transaction is splitting assets — including retirement assets.

The most common type of retirement asset we deal with in Utah divorces is money in the 401(k). Almost no one has a pension anymore, so it’s usually a 401(k).

When you split a 401(k) at divorce, this question always comes up: do we pay taxes if we split the 401(k)?

The answer is no, and here’s why: when you split the 401(k), you’re not selling any of the stuff inside the 401(k).

All you’re doing is moving money around.

What happens is the 401(k) company takes money inside one spouse’s 401(k), creates a new account for the other spouse, and moves a percentage of the money in to the new account.

So, when you split the 401(k) during Utah divorces, you end up with two accounts instead of one, but no taxes are paid in the process.

Now, keep in mind that if someone cashes out the stuff from the 401(k) after the money’s been split, that’s a taxable event. You will pay taxes on that sale.

But, those taxes will be paid by the spouse who cashed out, so if you don’t cash anything out of your personal 401(k) account, you won’t pay any taxes.

Protect Your Money And Your Family

We remove fear associated with divorce, protect your money & maximize time with your kids!

We're here to help. Let's determine your best options.

Call Us 24//7 at 801-685-9999 to Speak with a Live Representative

Utah Divorce FAQs
Top 100 Divorce Blog
What Clients Are Saying…
BrownLaw icon
Excellent
Brown Family Law
4.8
Based on 929 reviews
Anne and Josh are Fantastic!!
I couldn’t have done it without Nathaniel Garrabrandt and the Brown Family Law truly the best experience and people to work with thank you!!
Brown Family Law is likely the most outstanding Family Law office in Utah. They care deeply about each client, responds quickly to every client question and concerns. If anyone is in a situation of divorce and/or child custody, I highly recommend this office to assist you with your rights. They stand firmly behind their clients.
Response from the owner:Thank you, Craig.
I can’t say enough good things about Clay Randle and Katrina Redd. They were both incredibly professional, responsive, and knowledgeable throughout my case. Their experience and advice were invaluable, and I truly appreciated their support every step of the way.
Daniel was patient, efficient, professional, and kind. Brown Family Law was easy to work with and very competent. Highly recommend.
Muchas gracias, professionales. Me ayudaron con mi caso, gracias.
Leilani Whitmer was my attorney for mediation day at the provo 4th district court on May 9th and absolutely knocked it out of the park. She made the process so smooth and easy I'd recommend her for any family law issue you could possibly fathom.
Clay Randle is absolutely amazing, well educated, knowledgeable lawyer. He’s approached, always makes sure you’re on the top of the situation and very helpful. I’ve had a pleasure working with him and I recommend him as your top notch attorney.
Brown Family Law has been wonderful to work with! Extremely knowledgeable and professional. Clay went the extra effort in everything he did for us. Couldn’t be more pleased!! I highly recommend their services.
Marco is beyond insightful!
yH5BAEAAAAALAAAAAABAAEAAAIBRAA7

Categories

Related Posts