Dividing Retirement Accounts In Divorce
You Worked Hard For Your Retirement But What Happens To It In A Divorce?
A very common issue that divorce attorneys deal with in their divorce cases is where one or both parties to the divorce case have a pension, 401k, or other type of retirement account. It is well settled in Florida divorce law that any assets added during the course of the marriage are subject to equitable division meaning that both husband and wife are entitled to claim half of the asset in a divorce.
This means that if a spouse has a 401k then any portion of that retirement account [1] that was added during the marriage, including the interest earned, will be divided evenly with the other spouse unless the parties agree otherwise at mediation. It is common for divorcing couples to fight over division of retirement accounts,however, when experienced divorce lawyers are involved in the litigation the issue settles rather quickly as the attorneys understand what a judge will order if things go to trial.
Pensions are also subject to this same division in a divorce case with some differences. The value of the pension at the time of filing for divorce will be the value used to divide a pension rather than the value at the actual retirement. This means that if Tom and Mary get divorced 15 years before Tom’s retirement then the pension will be valued at the time of the divorce and Mary is entitled to half of the value at the time of the divorce which is less that if it were valued at time of retirement. Mary usually will not see any of these funds until Tom retires and upon retirement of Tom Mary will receive her portion each month.
When divorcing couples need to split a retirement account, such as a 401k, they will need the presiding judge to sign a qualified domestic relations order also known as a QDRO (pronounced quadro). The QDRO is a court order for the 401k, or other retirement account, manager to split the retirement account and place half in a new separate retirement account. This serves to protect both parties from the tax penalties associated with pulling funds from a retirement account too early.
QDRO drafting is a skill that many divorce attorneys choose to farm out to outside QDRO specialists to ensure that the order has the best possible chances of judicial approval and for use by retirement account managers. The cost to have a third party professional draft a QDRO can range from $500 to upwards of $1500 for well known drafters.
It is important for divorce attorneys and their clients to understand that there are certain pitfalls and tax implications to consider when splitting up retirement accounts and there is no substitute for seeking advice from an experienced divorce lawyer.
If you have questions regarding your divorce case then call Sean Smallwood,P.A. today and ask about our available payment plans.
sources: http://www.foxbusiness.com/personal-finance/2015/11/17/who-gets-retirement-accounts-in-divorce/
Sean Smallwood is an Orlando divorce attorney for the law firm Sean Smallwood, Orlando Divorce & Family Law P.A. where he represents clients in all areas of family law and divorce. 100% of the practice is devoted to family law. As an attorney in Orlando, he has helped many families with a wide variety of family law cases including Divorce, Child Custody, Child Support, and many other issues.
