Marital property is defined as any assets or debts accrued during the time of the marriage. With regard to retirement accounts, if you contributed money to the account during your marriage, your spouse is likely entitled to some amount of it. An experienced divorce lawyer can help you protect assets and accounts, and help you avoid taxes and other penalties during the legal process.
Retirement accounts and benefits can be a major point of contention among married couples, especially when involved in high-asset divorces. That’s where the Los Angeles, CA-based Law Office of Karen S. Brown can help. We’d like to go over some basic concerns when it comes to the division of retirement accounts during a divorce.
Any retirement accounts from your personal employment as well as government benefits may be affected by a divorce. This includes:
Social security retirement benefits
Keep in mind that the division of these assets would not apply if you specified that certain accounts are entirely your own in a prenuptial agreement. This is why prenups may be a smart strategy in protecting each spouse’s assets.
The overall cost of a divorce can be substantial, which might tempt you to dip into your retirement savings early to help with a division of assets. This is a bad idea. Early withdrawal of retirement savings will require paying taxes on the amount and it may also incur further penalties if a judge hasn’t yet ordered a division of assets.
In a divorce, one spouse may be entitled to a share of the other spouse’s social security retirement benefits. To qualify for a share of these benefits, certain criteria must be met. These requirements include:
The marriage lasted at least 10 years
The individual is currently not married
The individual must be 62 years old or older
The individual would earn less in their own social security benefits than they would earn from their former spouse’s social security retirement benefits
When dividing a qualified retirement plan such as a pension or a 401(k), a qualified domestic relations order (QDRO) is a sound idea. A QDRO helps avoid substantial taxes and penalties. This allows assets from a spouse’s retirement account to be rolled over into an IRA without the traditional early withdrawal tax penalties.
If you are transferring retirement funds from IRAs, a transfer incident to divorce can help avoid taxes and penalties on the transfer itself. Your spouse who receives the transferred funds will be responsible for any taxes on the funds taken out of the account.
As you can see, these financial matters in a divorce can be quite complicated. Failure to file the right paperwork or take the right steps can lead to major financial penalties, which can set back your retirement plans.
By working with a skilled divorce attorney, you can protect your retirement while ensuring a fair division of property with your former spouse. Our team can assess any proposals from your spouse’s legal representative and help you make the most advantageous choice for your life and your needs moving forward.
For more information about your legal rights during a divorce, be sure to contact an experienced divorce and family law attorney. The team at the Law Office of Karen S. Brown is here to help. You can reach us by phone at (323) 766-6426.