How Retirement Assets Are Divided in Divorce
Posted on Jul 23, 2017 10:08pm PDT
Retirement asset division is required if couples contributed to a retirement
account during the course of their marriage. Accounts such as IRAs, 401ks,
403 plans, stock options, pension plans, and other retirement assets are
likely subject to distribution in the event of a
divorce.
In California, retirement assets are divided the same way as other marital
assets - equitably between spouses. This does not necessarily mean that
the assets will be split evenly in half - it means that the accounts will
be divided fairly.
Who Gets What Retirement Plan When We Divorce?
When dividing retirement assets, consider the following issues:
-
Contributions during marriage: The funds you contributed prior to your marriage are not subject to division,
only the funds contributed during the marriage. You and your attorney
will need to sort out which funds are subject to distribution.
-
Valuation: Most retirement accounts and pension plans are active investments that
grow over time. Pension plans also do not pay out until retirement. On
top of that, there is the issue of inflation. This can make it tricky
to determine the accurate value of an asset.
-
Tax considerations - Although retirement transfers as a result of the divorce settlement
are typically not taxable, the manner in which it is transferred can affect
its taxation status. You want to make sure that the assets are transferred
correctly. If you end up doing a full distribution, you will have to bear
the tax consequences.
Couples who were in long marriages often have more difficulty determining
how much of the asset each spouse is entitled to receive because of the
complex web of intermingled finances. Make sure you seek the help of an
attorney and trusted financial experts when dividing marital property
Tips for Dividing Retirement Assets in a Divorce
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Use a QDRO [Qualified Domestic Relations Order] - This is a legal document that orders the distribution of retirement accounts
to a spouse or dependent. Having a QDRO in place can help you transfer
retirement assets and pensions without incurring unnecessary penalties
or taxes. Without a QDRO, it can be difficult for a spouse to claim rights
to their entitled retirement assets, even if it the divorce decree includes it.
-
Designate beneficiaries - Remember to update your beneficiary designations after the divorce. The
last thing you would want is for your retirement assets to automatically
transfer over to your former spouse upon your passing.
-
Keep thorough records - As a person ages, they may have accumulated five or six different types
of retirement plans and accounts. It is a good idea to keep records of
all your accounts - and update your beneficiaries on all of them.
Providing Experienced Counsel for Divorce & Property Division
There are many complexities involved when dividing retirement assets and
other marital property. Make sure that you avoid common pitfalls and protect
your financial interests by consulting our experienced divorce attorneys
in Fresno. At Arnold Law Group, APC, we can provide trusted support throughout
your divorce.