Can I liquidate IRAs and stocks before a divorce? 22 Answers as of June 21, 2011

My wife has left me. I believe she has contacted an attorney but no paperwork has been filed. I have several IRAs and stocks that I want to liquidate to purchase a car that she will have use of while I am deployed. If she files for divorce, can I be penalized for doing this?

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Warner Center Law Offices of Donald F. Conviser
Warner Center Law Offices of Donald F. Conviser | Donald F. Conviser
Once you are served with a divorce, there will be automatic temporary restraining orders (on the back of the Summons) which are binding on you. Before then, if you liquidate community assets, it is possible that your wife could seek penalties against you in a divorce for violating your fiduciary duty to preserve the community assets. It may be wiser to merely leave the assets where they are, to avoid the risk that your wife won't appreciate your unilateral decision to liquidate community assets without her knowledge and consent, and seek remedies against you for doing so.
Answer Applies to: California
Replied: 6/21/2011
Reeves Law Firm, P.C.
Reeves Law Firm, P.C. | Roy L. Reeves
Not if she has not filed and you have not been served. Just because you believe she is about to do it does not change your facts. That said, there is a practical limit, if you liquidate everything it does begin to appear as though you are "planning" and that fact can be taken into consideration when you get to court.
Answer Applies to: Texas
Replied: 6/16/2011
Michael Anthony Wing, P.C.
Michael Anthony Wing, P.C. | Michael Anthony Wing
While you are married and there is no pending order, there is no order that you are disobeying, and therefore no contempt claim to be made. Stay well.
Answer Applies to: Alabama
Replied: 6/15/2011
Shana E. Thompson Law
Shana E. Thompson Law | Shana Thompson
In Washington State, some counties issue financial restraining orders as soon as the case is filed. However, if there are no restraints in place, then there is nothing that prevents you from accessing these funds. However, the court will be able to trace what happened to the funds and, depending on what other assets there are of the marriage, the court can order that your wife receive other property that would have normally been awarded to you to compensate her for the funds that you accessed from the retirement accounts. In addition, you will be the one to bear the taxes and penalties associated with the early withdrawals.
Answer Applies to: Washington
Replied: 6/15/2011
Fredric H. Aaron, Attorney at Law, P.C.
Fredric H. Aaron, Attorney at Law, P.C. | Fredric Harlan Aaron
Any property acquired during the marriage is subject to equitable distribution. This includes any stocks and bonds and any IRA/401K contributions and accruals made during the time of the marriage. If you liquidate any investments prior to the granting of the divorce, you raise two issues. First, any funds you pocket will mean that an equal amount of marital assets will be going to your spouse to offset these amounts. Second, if your liquidation of the assets is at a loss or triggers tax consequences, you run the risk that your spouse will claim that you committed wasteful dissipation of the marital assets. This could result in her getting more than 50% in equitable distribution.
Answer Applies to: New York
Replied: 6/15/2011
    Meriwether & Tharp LLC
    Meriwether & Tharp LLC | Patrick Meriwether
    I would not recommend liquidating an IRA to purchase a car. Even if you do not put another penny into the IRA, it will continued to grow in value tax free as a result of market forces. If you liquidate the typical IRA, you will pay taxes on the income as well as a 10% tax penalty. If you use what is left over to purchase a vehicle, you have now converted an asset that grows in value over the years to an asset that looses value every month.
    Answer Applies to: Georgia
    Replied: 6/15/2011
    Goolsby Law Office
    Goolsby Law Office | Richard Goolsby
    This is precisely the type of question which you should first discuss carefully with your own divorce attorney, who can also advise you as to your rights and options. Please retain a divorce attorney ASAP. Good luck!
    Answer Applies to: Georgia
    Replied: 6/14/2011
    Theodore W. Robinson, P.C.
    Theodore W. Robinson, P.C. | Theodore W. Robinson
    Not likely, especially because she will have use of the car while you're gone. However, check with a JAG lawyer as well just to be sure. Good luck.
    Answer Applies to: New York
    Replied: 6/14/2011
    Law Office of Robert L. Fiedler
    Law Office of Robert L. Fiedler | Robert L Fiedler
    Prior to getting served, you are under no orders. But, you should consider two issues - first the tax ramifications and second, these funds are part of the marital estate and subject to distribution. Without commenting on what you would do with the proceeds, you may be forced to account for the funds and still have to make a distribution from the cash you get.
    Answer Applies to: Connecticut
    Replied: 6/14/2011
    Wolverine Law | Stuart Collis
    Yes, you can. Furthermore, liquidating retirement funds may carry a 10% penalty on your taxes.
    Answer Applies to: Michigan
    Replied: 6/14/2011
    Vermeulen Law office P.A.
    Vermeulen Law office P.A. | Cynthia J.Vermeulen
    Under Minnesota law, once a divorce has been started by service of the Summons and Petition for Dissolution, there is a temporary restraining order in place which pertains to liquidation of assets. Since you are being deployed, if you and she agree on this liquidation to buy her a car, it should be acceptable. It is best, however, for you to contact an experienced family lawyer in your area for specific advice and legal representation.
    Answer Applies to: Minnesota
    Replied: 6/14/2011
    Law Office of L. Paul Zahn
    Law Office of L. Paul Zahn | Paul Zahn
    If there is nothing served on you, you are not restrained from doing this, however the property in the IRAs and stocks are community property, so converting it from retirement accounts to a car doesn't change that. You also may be violating your fiduciary duty to your wife if you do this with the intent of depleting a community asset (not that this is your intention). If you are in my area and are looking for an attorney, please contact me for a free consultation.
    Answer Applies to: California
    Replied: 6/14/2011
    Beresford Booth PLLC
    Beresford Booth PLLC | S. Scott Burkhalter
    There is nothing to prevent you from disposing of assets without a court order preventing you from doing so. HOWEVER, the disposition of assets will likely be considered in the overall settlement.
    Answer Applies to: Washington
    Replied: 6/14/2011
    Law Office of James Lentz
    Law Office of James Lentz | James Lentz
    If your wife files for divorce, it is likely that the court in Ohio would issue an order restraining you both from liquidating anything. But until; such an order is in place, you can do as you please. Before you sell anything, please review you plan with your local JAG representative or a civil attorney familiar with the Servicepersons Civil Relief Act. You may save yourself a lot of trouble.
    Answer Applies to: Ohio
    Replied: 6/14/2011
    Law Office Of Jody A. Miller
    Law Office Of Jody A. Miller | Jody A. Miller
    Technically you can liquidate stocks before a divorce is filed; however most likely those funds will have to be accounted for during the divorce. If you use the funds to purchase a car for her, there shouldn't be much of a problem. But if you use the funds for something else, you might have to account for the liquidation during the divorce process. Once a divorce is filed, there is a prohibition against liquidating such funds.
    Answer Applies to: Georgia
    Replied: 6/14/2011
    Seattle Divorce Services
    Seattle Divorce Services | Michael V. Fancher
    Under Washington law, both spouses have the ability to manage community property for the benefit of the community. Once a divorce is filed, your spouse can ask the court for temporary restraining orders limiting the ability to dispose of assets pending trial. I don't see any reason at this point why you cannot use the financial assets to purchase a car, but it would be good to let her know in advance that you plan to do this in case she disagrees.
    Answer Applies to: Washington
    Replied: 6/14/2011
    Law Office of Patricia Van Haren
    Law Office of Patricia Van Haren | Patricia Van Haren
    Your wife is entitled to of the community assets. If you liquidate the assets, you would be required to give her of the assets. Once a divorce matter has been filed, you would be penalized for concealing or getting rid of any assets. If you are to liquidate stocks and the IRA, you would need to advise your wife of your intentions and make sure that it is documented and that she has the opportunity to agree or disagree. If she does not agree, it would not be wise to liquidate any assets without orders from the court. You may wish to consult with an attorney to discuss the specifics of your case.
    Answer Applies to: California
    Replied: 6/14/2011
    John E. Kirchner, Attorney at Law
    John E. Kirchner, Attorney at Law | John Kirchner
    If you simply convert one asset (cash) into another form (a vehicle) there isn't much legitimate complaint to be made. Strictly speaking until a divorce is actually filed there are no "rules" to prevent you from doing what you propose. Since you have no clear obligation to provide her a vehicle anyway, if that is what you do she (and her attorney) would have a hard time convincing a court that your liquidating stocks/IRA's was for the purpose of harming her. Even after a divorce is filed, it would be hard to find fault in doing something that benefits her.
    Answer Applies to: Colorado
    Replied: 6/14/2011
    Vincent J. Bernabei LLC
    Vincent J. Bernabei LLC | Vincent J. Bernabei
    There is nothing prohibiting you from liquidating any assets. Once you are served with copies of a summons and petition for dissolution of marriage, you are prohibited from transferring or disposing of assets without permission of your spouse or the court. There are some exceptions to this prohibition.
    If you will be subject to an early withdrawal penalty if you withdraw the IRAs, I do not recommend that you do that. If all you are doing is changing the character of the assets (stocks/IRA vs. car) but the overall value of marital assets is about the same as before the transfer, then you are ok.
    Answer Applies to: Oregon
    Replied: 6/14/2011
    Ashman Law Office
    Ashman Law Office | Glen Edward Ashman
    Any major transaction right before a divorce will likely be second guessed. Do not make any financial decisions without first retaining legal counsel.
    Answer Applies to: Georgia
    Replied: 6/14/2011
    Gregory T. Buckley, Attorney at Law
    Gregory T. Buckley, Attorney at Law | Gregory T. Buckley
    I believe that as long as you keep records of this and understand that the items that are liquidated status as marital property is not changed by doing this prior to a divorce, you should not be penalized for this. Especially if you are actually using the proceeds to acquire an automobile for her use.
    Answer Applies to: Florida
    Replied: 6/14/2011
    Law Office of Michael W. Bugni
    Law Office of Michael W. Bugni | Jay W. Neff
    Until some sort of restraining orders have been filed in a divorce case, there is nothing to keep you from liquidating stocks and IRA's. However, just because you can does not mean that it is a good idea. First, there are potential tax consequences. Any money that you pull out of an IRA or retirement account will be subject to income tax. Further, unless you are over 59.5 years of age, there is also a 10% early withdrawal penalty. Depending on the details of your tax situation, this can be a significant "bite." Second, even though at present there is, apparently, no order preventing you liquidating these items that does not mean that the court won't take it into account when it comes time to dividing property. Third, you mention being deployed. I assume that this means that you are in the military and that you are being deployed out of the area. If this is true, you need to remember that the civil relief act may give you some leverage. If you get the chance, you should speak with your JAG officer about this as he/she can give you way more information about it than I can in this short email.
    Answer Applies to: Washington
    Replied: 6/14/2011
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