For now, let’s acquire some understanding. And the number one thing for you to understand is the difference between taxable and non-taxable assets. In a perfect world, all your assets and your soon-to-be ex-spouse’s assets would be in tax-deferred retirement accounts. That’s because IRAs and 401ks are easily split in a divorce.

In those situations, all you need is a QDRO from the courts (easy to do) to split the assets. At that point, each person takes their portion as decided by the court and just keeps the money growing in their own IRAs. The beauty of this is that neither one of you incur any tax liability as a result of this split.

Now, it’s likely that your assets aren’t all in retirement accounts. And if your ex-offers you a tax-deferred account in exchange for a taxable account, he’s not playing fair. Let me use an example to illustrate. Say your adversarial spouse offers to give you $100,000 in his IRA if you give him the $100,000 in the bank account. If you go for this, your husband will have full access to that $100,000. But if you want access to your money, you’d have to pull the funds out of the IRA and pay taxes and penalties on it. You might be left with $50,000 or less. So if you are negotiating your divorce, make sure to look at your after-tax values – not pre-tax.