Help with Value of Roth in Divorce (vs Tax-def'd acct)

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
Posts: 116
Joined: Tue Mar 14, 2017 1:51 pm

Help with Value of Roth in Divorce (vs Tax-def'd acct)

Post by retireearly » Thu Jul 18, 2019 5:06 pm


I am running into many dead ends trying to determine the "value" of Roth assets vs Tax-def'd assets during divorce proceedings.

I am shocked that both lawyers appear to simply accept that in New York State, how assets are divided are based on pooling the assets, dividing and then determining equity regardless of the type of asset (Roth vs non-Roth). It is actually quite baffling and frustrating for something so basic to not be commonplace in divorce in NYS.

-The scenario is that one party has 265K in Roth assets and 327K tax-def'd (401K)
-The other party has 118K in ROTH but 676K in tax-def'd (457/403b).

It appears it is standard practice by the lawyers to simply add all of those up, divide in two, and subtract from the average. It seems it is the norm and I'm looked at like an alien for bring up the "ROTH PREMIUM" and how it cannot be done that like to determine equitable distribution...

The above results in roughly 101K being owed however it does not factor in the premium of ROTH.

I suggested the two pools be split by doing each exercise with Tax-def'd and then with ROTH. This would essentially split Tax-def'd, then split Roth.
However, the other party that is getting 101K is not going for that despite it being morally right. My lawyer thinks the judge (if it goes to trial) won't care and will simply say "divide it up" unless there is a compelling case made.

This divorce was originally through mediation. I signed off. My Ex changed her mind and served me after 8 months. Once lawyers got involved, right/wrong didn't matter anymore.

Any thoughts, suggestions, help, etc? Anyone go through this, esp. in New York State? I would like to avoid having to hire an expense tax-law or finance expert because that will also get very costly...hoping to learn something I'm missing or get some insight I had not thought of. Thanks!
Age:45, about to be single for first time since 1995. Kids 8/13. Current AA 70/30, Desired stock AA 50/50, overweight EM, Int SC and US SCV.

Posts: 1248
Joined: Sun Feb 20, 2011 9:44 am

Re: Help with Value of Roth in Divorce (vs Tax-def'd acct)

Post by bberris » Thu Jul 18, 2019 6:00 pm

The right thing to do is just split each type of asset equally or proportionally. That is what the judge will do anyway.

User avatar
Posts: 1642
Joined: Sat Sep 24, 2011 12:39 am

Re: Help with Value of Roth in Divorce (vs Tax-def'd acct)

Post by FelixTheCat » Thu Jul 18, 2019 6:32 pm

The difference between the Roth's is roughly 73K out of 1.4M. I understand what you are saying because I've been there. I would drop it because the argument just feeds the attorneys.
Felix is a wonderful, wonderful cat.

Posts: 4256
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Help with Value of Roth in Divorce (vs Tax-def'd acct)

Post by bsteiner » Thu Jul 18, 2019 9:20 pm

Matrimonial lawyers don't always understand the nature of assets.

The simplest thing is to divide each asset equally. Absent any reason to do otherwise, the one with the smaller Roth should propose that.

It's unlikely that this will get to a judge. The vast majority of cases are settled.

Of course, if a particular asset is more valuable to one party (for example, an IRA is more valuable to someone who can defer distributions as long as possible), there's an opportunity to add value by dividing the assets non pro rata, with the parties agreeing on appropriate adjustments.

Posts: 16
Joined: Mon Sep 10, 2018 1:56 am

Re: Help with Value of Roth in Divorce (vs Tax-def'd acct)

Post by casaver » Thu Jul 18, 2019 10:56 pm

If this goes to judge, every account will be split. Common practice is to discount pre-tax 401k.

User avatar
Posts: 488
Joined: Fri Mar 02, 2018 10:36 pm

Re: Help with Value of Roth in Divorce (vs Tax-def'd acct)

Post by LilyFleur » Thu Jul 18, 2019 10:59 pm

Well, the good news is that you have assets to fight over. The bad news is that the longer you fight, the more you pay the attorneys.

In my divorce, we sat in front of the attorneys adding up the pre-tax assets and the post-tax assets and agreeing on an equalization payment for both pre-tax and post-tax. The attorneys didn't know what the heck we were doing, but they sat there getting paid while we did the work.

Although, the judge and the attorneys did motivate the other party to do the right thing.

Post Reply