When getting a divorce, there are so many financial factors to consider. From alimony, child support, property rights, and so many other hot button issues that need to be addressed in divorce terms, sometimes retirement benefits don’t seem like such a big deal—but they are. Successfully dividing retirement funds between parties is essential to ensure a fair division of assets, especially because many people have 401Ks and other retirement funds that are worth many thousands of dollars.

Experience the Torrence L. Howell Difference

At Law Offices of Torrence L. Howell you can count on us to have your back through every step of your divorce. Since our specialties are family and business law, you can trust that we will take care of every financial detail of your divorce terms so you can get divorced as efficiently as possible and move on, hopefully to a more pleasant phase of your life.

Talk it Out

It’s essential that you talk to your retirement plan providers because many plans have strict policies about what needs to be done in the event of a divorce. Many retirement plan companies dictate whether the funds will need to be paid right away when a divorce occurs, or when the owner reaches a certain age, often 65. Some divide by shares, and others by percentage. Knowing what is required is the first step so you and your former spouse can make decisions about what to do with the retirement plan(s), if you have any options available.

Six and half a dozen

Dividing marital assets equally, including retirement benefits, is important to be able to reach an agreement on divorce terms. Many ex-spouses find it convenient to let one spouse retain his/her retirement fund, while the other spouse takes something of equal value. This option can be a bit tricky, though, because taxes, appreciation and depreciation, fees, and other variables can make it tough to figure out what would have the same value as the retirement account.

Split and Sit

Splitting your retirement account evenly is another option, but it also has some drawbacks. You’ll have to fill out a Qualified Domestic Relations Order (QDRO) that must conform to your retirement plan’s requirements in order to be accepted. If it’s rejected, finalization of your divorce may be delayed for months, weeks, or even year, as well as incurring additional fees. This QDRO must stipulate that you’ll continue to pay into the retirement account and manage its investment choices, while the former spouse will make investment choices for his/her portion of the account without contributing to it.

Liquid Gold

You could also liquidate the portion of the retirement funds and give your former spouse the amount of money that pertains to him/her in a lump sum. There are some legal requirements that will need to be met to make this an option, and there are some tough tax consequences, so financially this option might not make sense for most people. But perhaps it makes sense emotionally in the sense that former spouses will be able to make a completely clean break and move on in terms of their finances.

Roll it On Over

If you’ve left the company the retirement plan is tied or you’re older than age 59.5, you may be able to roll the portion of funds awarded to your ex-spouse into an IRA. With this option, you won’t incur any penalties or tax liability from rolling over funds, and your ex can choose from a greater variety of investment choices.

Let Us Help

At Law Offices of Torrence L. Howell, we’ll walk you through all financial considerations during your divorce, so you can be sure that you’ll be able to walk away with a fair deal. Call (909) 920-0908 or email info@torrencelhowelllaw.com to start discussing your particular situation today.