A marriage may be over in the minds of a couple when they decide to get divorced. But, in reality, time needs to pass from that moment until the final dissolution. There will be negotiations, discussions and disagreements along the way, all of which can be resolved as long as both parties are willing to address change with dignity, respect and kindness for each other.

Let me share some in-the-trenches insights from my three decades working with high-net-worth families, as well as lessons from FINRA's "6 Tips for Managing Investments Through Divorce" (tinyurl.com/jv4hp6vy).

1. Update Account Beneficiaries

My view is that both parties will need to address all beneficiary designations to determine whether soon-to-be-former spouses should inherit assets. FINRA goes further, saying bluntly: "If you don't want your spouse to be the beneficiary on your investment accounts, contact your brokerage firm to remove your spouse's name and designate one or more new beneficiaries."

2. Get Access to Investment Accounts

From my perspective, in a healthy marriage (and a reasonable dissolution), both spouses need to know about all accounts, whether joint or individually owned.

FINRA offers specifics: "Do I know about all investment, bank or other financial accounts that I might be entitled to? How is each account set up -- in my name or my spouse's name only, jointly held or some other way? Do I have the account numbers, login credentials, contact information and other necessary information to access these accounts? Am I able to make decisions in these accounts?"

3. Consider Whether to Keep or Sell Assets

Based on my experience, it's best to make decisions on individual holdings together.

FINRA's call: "Before you sell any assets, consider the tax consequences and other possible costs or penalties. In standard, taxable accounts, selling securities can trigger capital gains taxes. And some assets, such as annuities, can come with steep penalties if you exit the investment early."

4. Decide How to Divide Taxable Investment Accounts

I agree with FINRA that "[s]plitting up assets between spouses will involve different processes. For taxable accounts, such as a brokerage account you own jointly with your spouse, you typically must notify the financial institution in writing to request that the joint account be closed and that new, separate accounts be opened in each person's name. The letter should detail how to allocate the investment assets between the two accounts."

You may want to take quick action if you are "worried about actions your spouse might take regarding a joint brokerage account -- investments or withdrawals you disagree with, for instance. You can contact your financial institution and ask whether the account can be frozen until you reach an agreement on how to divide your assets."

5. Evaluate Retirement Accounts

Retirement accounts take special knowledge and special care. This is when you want your CPA and attorney involved.

As FINRA points out, "In most states, retirement account assets generally are considered marital property, which means your spouse might be entitled to a portion of these assets."

A special court order (Qualified Domestic Relations Order) may be required to split a spouse's 401(k), 403(b) or pension, while an IRA can be handled under a separation agreement or divorce decree. Understand if income taxes will be triggered by your decisions.

6. Enlist the Help of Professionals

I agree with FINRA that "[d]ividing financial assets during divorce can be overwhelming." I also agree that expert counsel is needed. "Choose someone with the right experience to help with estate planning and other investment-related issues. Also consider working with an investment professional and an accountant to understand the tax implications of your decisions."

Divorce is an end to a joint venture. During the potentially disruptive negotiation period when the future is yet to be designed, it's helpful to remember that time will take you through a series of decisions that will eventually come to a resolution. And, in some cases, as with co-parenting, that joint venture will be redefined, not eliminated.

The process is all about traveling through time with dignity, decorum and experienced counsel who aren't looking to win big. The best counsel wants both parties to move into a healthy next stage of life as former spouses.

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The subject of having multiple traditional (tax-deferred) IRA accounts came up recently in a presentation I was giving on QCDs. The context was donating IRA money to charity after age 73 during the IRA's required minimum distribution (RMD) phase. (By the way, if you would like to be invited to in-person or online presentations, be sure to check juliejason.com/events, or write to me at readers@juliejason.com.)

A related question about multiple IRAs came to me from a reader ("Hank"), age 75, who has five traditional IRAs that he would like to consolidate.

While I don't have statistics on the prevalence of multiple traditional IRAs, in my personal experience working with families for over 30 years, I do see multiple IRAs. For example, when you're in your working years, you might set up a separate IRA to capture assets transferred from a 401(k) when you change jobs. Or you could have a separate IRA to house precious metals (only certain IRA custodians offer custody of precious metals). Or you could have inherited an IRA, which cannot be combined with your own IRA (with an exception for spouses).

But, beyond that, I'll always question the rationale behind having multiple traditional IRA accounts. One answer could be diversification, which usually means having accounts at multiple brokerage firms that might offer different levels of service or different investment products -- all potentially good reasons when you are below RMD age.

After reaching age 73, a complication arises. Each year, a mandated dollar amount must be withdrawn from your traditional IRAs to satisfy RMDs.

RMDs are based on the previous year's Dec. 31 values of the retirement accounts (see IRS webpage "Retirement plan and IRA required minimum distributions FAQs" at tinyurl.com/y9wajm4z).

Question 4 on the IRS FAQs page asks, "How is the amount of the required minimum distribution calculated?" The answer: "Generally, a RMD is calculated for each account by dividing the prior December 31 balance of that IRA or retirement plan account by a life expectancy factor that the IRS publishes in Tables in Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)."

The life expectancy tables include Table I (single life expectancy), Table II (joint and last survivor life expectancy) and the most-used table, Table III (uniform lifetime).

Assume that on Dec. 31, 2024, Hank had four IRAs totaling $1 million. When he looks up the amount he needs to take in RMDs for 2025, he finds that the divisor for his age (75) is 24.6 (in Table III). That means he will need to take RMDs totaling about $41,000 in 2025, using the RMD calculator at Investor.gov (tinyurl.com/4et8e684).

According to the answer to Question 5 on the IRS FAQs page, "An IRA owner must calculate the RMD separately for each IRA they own but can withdraw the total amount from one or more of the IRAs."

Hank is free to take this total amount from any one of his IRAs or to spread the RMD among his IRAs. (By the way, this does not apply to 401(k)s -- each 401(k) has a separate RMD requirement. Read more about this rule in "Required Minimum Distributions: Know Your Deadlines" at the FINRA website -- tinyurl.com/27k846uz.)

Once taken, the RMDs are taxable as income. The answer to IRS FAQs Question 11 states "The account owner is taxed at their income tax rate on the amount of the withdrawn RMD. However, to the extent the RMD is a return of basis or is a qualified distribution from a Roth IRA, it is tax free."

Upon reaching RMD age, amounts and timing both have to be managed to avoid tax penalties (25% of the amount that was not timely withdrawn). If there is a desire to donate RMD money to charity through a QCD, that's another layer of recordkeeping. And, eventually, those IRAs and RMDs will transfer to beneficiaries, whose interests should also be considered. That leads to favoring consolidation in many situations.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

We’re quickly closing in on the end of the year, which means it’s time to make sure that required minimum distributions (RMDs) from tax-deferred accounts are taken care of.

It’s also the time to reflect on worthy causes and, with a sense of gratitude, review how you might support them. Put the two thoughts together and you have perfect dance partners: Bringing together charitable causes and RMDs through QCDs (qualified charitable distributions).

While we’ve talked about QCDs before, the topic continues to generate interest. QCDs can be used to benefit both charity and the IRA owner. If the IRA owner is in RMD stage, he can arrange to pay all or part of the RMD directly to the charity to avoid taxes on the withdrawal. (The maximum QCD for 2025 is $108,000 per IRA owner).

The question I’m addressing today came from “Joe,” a 75-year-old individual who actually organized a brand-new public charity that I’ll call “ABC Charity.” As a public charity, ABC will raise funds from public sources to pay bills. Can the founder also contribute with his own QCD?

Attorney Leonard Calbo, a partner at Connecticut-based Smolin, Calbo, Davidson, and Associates, LLC, said, “I suppose the IRS could disallow it by saying the donor received an inherent benefit since it went to a public charity set up by the donor, but I think that is a stretch.”

In these potentially tricky situations, it’s wise to go back to basics. For guidance, let’s run through what the IRS provides us, starting with IRS Publication 590-B (tinyurl.com/td2dbtdx):

“A QCD is generally a nontaxable distribution made directly by the trustee of your IRA (other than an ongoing SEP or SIMPLE IRA) to an organization …”

So, the QCD must be made directly by the trustee of the IRA to the organization -- Joe will call his IRA trustee (custodian) to arrange it.

“… eligible to receive tax-deductible contributions.” The IRS Tax Exempt Organization Search (tinyurl.com/48y7pz64) allows you to find organizations that have a 501(c)(3) designation, meaning they are eligible to receive tax-deductible contributions. ABC Charity has a 501(c)(3) designation.

“You must be at least age 70 1/2 when the distribution was made.” Not a problem, since Joe is 75. If he had not yet reached age 73 (the current age for requiring RMDs for IRA owners) but was older than 70 1/2, he could still make the QCD.

Another requirement? The charity must acknowledge the receipt of the QCD in writing, noting ng the amount received, the date, and that no goods or services were provided in exchange for the donation.

That can be a potential sticking point depending on the circumstances. In IRS Publication 526, “Charitable Contributions” (tinyurl.com/t7et2eyd), is “Contributions From Which You Benefit,” which states: “If you receive or expect to receive a financial or economic benefit as a result of making a contribution to a qualified organization, you can't deduct the part of the contribution that represents the value of the benefit you receive.”

This would apply if Joe received goods or services in exchange for the QCD. But here, Joe is doing the opposite. He is not only donating money, but also his time and knowledge to further the mission without pay.

Is there some way that a founder benefits beyond the benefit every taxpayer receives when making a QCD (tax savings) just because he is the founder?

Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting, believes the answer is “no.” “The founder of a charity that is considered a qualified 501(c)(3) charity by the IRS can make a (QCD) to the charity provided that the founder receives no personal benefit from the contributed funds (other than the tax exclusion), the charity is a qualified 501(c)(3) charity, and the transfer was made directly from the IRA administrator to the qualified charity.”

Again, be sure to confirm the answer with your accountant or attorney. In and of itself, the fact that the donor is the founder of a public charity does not end the discussion. It all depends on whether there are financial or economic benefits.

On Nov. 5, I’m giving an in-person presentation on QCDs at Greenwich Library. For more information, go to juliejason.com/events/upcoming-events.

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