When a California couple gets a divorce, discussions begin early about how to divide their assets and belongings. Typically, discussions regarding property division center on the family home, bank accounts and child custody. While it may not initially come to mind, a couple's retirement funds are often one of the largest assets they have. Experts agree that careful decisions must be made regarding these assets to avoid potential taxes or penalties.
Furthermore, if not handled properly, more of the funds may be granted to an ex-spouse than intended. Matrimonial lawyers ranked topics that were the most hotly argued in a divorce. Dividing retirement assets was number two on the survey after alimony and before business interests.
A qualified domestic relations order, or QDRO, is necessary for someone to receive a portion of an ex-spouse's retirement plan from a place of employment. This document is not the same as a divorce agreement. Therefore, it is important to have a knowledgeable attorney handle this process.
Experts say to not agree to a beneficiary change before a divorce is final. While still married, an account owner cannot change beneficiaries without the spouse's approval. In addition, be intentional about whether the division will be handled as a specific dollar amount for each or a percentage of the total. IRAs, or individual retirement accounts, are not included in a QDRO. However, it is important to handle these properly as well to avoid incurring unwanted penalties and taxes.
A California divorce attorney can be of valuable assistance as a person begins the process to end a marriage. Handling retirement funds and other property division questions are just a few of the issues that must be addressed. An experienced lawyer will work with clients to achieve the best outcome possible in the divorce process.
Source: CNBC, "How to avoid mistakes dividing up 401(k) assets in divorce", Sarah O'Brien, March 7, 2018