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:
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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.
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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.
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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.
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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.
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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.