Handling Retirement Funds in a Divorce
Divorce comes with many decisions, some more complex than others. Some of the most difficult decisions revolve around distribution of assets. In Florida, property and other assets acquired during the marriage are considered marital assets, belonging to both parties. This generally includes any retirement assets accumulated in retirement or pension accounts. Many couples fail to immediately address these funds in a divorce, but that can be a mistake. It is important to protect your retirement accounts when you and your spouse end your marriage.
Identify Retirement Accounts
Although you normally may not be paying much attention to your retirement accounts, when a divorce is imminent it is best to review these issues as soon as possible. If you have had several long-term jobs, you could have several or more pensions or retirement accounts. For this reason, it is helpful to keep good records of the companies and funds that you have accumulated. The dates of the retirement funds are critical since they will determine whether the money was accumulated during the marriage. There are issues with regards to these accounts that must be addressed, including taxation, and beneficiaries.
Retirement fund concerns can be quite complex, especially when several accounts, or multiple marriages are involved. If you need to transfer funds from an IRA or other savings account, it is necessary to do it properly. Incorrect transfer of funds could cause the transaction to be considered a full distribution, which may result in tax penalties. Another consideration regarding these accounts is the designated beneficiary. Remember to update these designations after the divorce in order to properly preserve your accounts and achieve the desired stipulations.
Discuss Retirement Accounts
While these accounts may be one of the last things on your mind as you navigate your divorce, they are important to your future. It is best to discuss your retirement accounts with your divorce attorney as soon as possible. You will likely need to request records from your employers (or former employers) that indicate the specific dates of participation, along with the amount of money that was added. This information will be essential when determining marital assets.
Benefit and Contribution Plans
The distribution of funds will depend on the type of account that is utilized. There are two main types of accounts including the defined-benefit plan and the defined-contribution plan. With defined-benefit plans, the spouse may have the opportunity to take a lump-sum payment, called a “cash-out” value. Defined-contribution plans require calculation of vesting percentages. These computations can become complicated, especially when there are multiple accounts to consider. There are also other types of retirement plans that need to be reviewed during a divorce, such as military retirement accounts and government pensions. In general, couples must equitably distribute funds in any accounts that had contributions during the marriage.
Because of the highly complex nature of retirement funds in a divorce, it is critical that you discuss your accounts with a skilled divorce attorney as quickly as possible. If you are seeking a divorce, contact the Tampa divorce attorneys and bankruptcy lawyers at All Family Law Group, P.A. in Tampa Bay at 813-816-2232 for a consultation at no charge or email us.
By Lynette Silon-Laguna Google+