Want to know how retirement accounts are divided during divorce? There are many different factors to consider when it comes to figuring out who gets what property once you divorce. When going through the process of property division in divorce, it is important to consider both the past and the future. For example, whether a spouse brought particular property with him or her into the marriage may determine ownership. Future-oriented assets including 401k, pensions, and other retirement accounts must also be divided and state laws determine how this is done. Our team of family law attorneys will let you know your rights to what retirement accounts are divided once you divorce! Speak to a divorce attorney now!
Retirement Accounts Divided in Divorce? Who Gets What?
Many families invest the majority of their money in retirement accounts. Though this can provide financial security after retirement, it can make property division in divorce more complex. It can be difficult for the average couple to divide retirement assets properly during divorce so use of a family law attorney is recommended.
In community property states, all assets are classified as community property jointly owned by the spouses. The property, including retirement account contributions, is equally divided during divorce. States that follow equitable distribution for property division allow courts to divide retirement accounts in a fair or equitable manner that is not necessarily equal. Rules regarding the classification of property as separate or joint vary by state.
An individual retirement account, or IRA, is a popular investment. If a divorcing couple agrees to divide the account balance of an IRA held by one spouse, this will require a court order that states how much the other spouse will receive. This usually enables funds to be transferred without any tax penalty. Transferred funds are considered property of the recipient and may be done directly or by making the recipient the owner of the original IRA while its initial owner takes out a new IRA.
When spouses negotiate property division during divorce, they may decide to make trade-offs. For example, one spouse may wish to retain his or her retirement account in exchange for providing another asset to the other spouse. Spouses are entitled to make such arrangements with each other directly. However, once they reach an agreement, they or their family law attorneys should include this in a written marital settlement agreement.
Get the Divorce Help You Need!
A court order called a Qualified Domestic Relations Order is required to divide a 401k. An attorney can prepare this order and present it to the court. Pension, IRA, or 401k and divorce distribution of assets can be complicated and some couples are forced to let the court make the decisions. Several factors determine the tax implications for retirement accounts, making it important to consult a tax attorney or CPA to prevent a financially unfavorable outcome. Getting the help you need to understand how retirement accounts are divided during divorce is easy – just give us a call!