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Dividing retirement funds during divorce

On Behalf of | Jun 27, 2019 | Complex Divorce & Property Division |

When people in California decide to divorce, the financial implications can be serious and long-lasting. This is especially true at the end of longer marriages where large assets like retirement funds are divided. As a result, people may have to make significant changes to how they plan for the future. There are some key points that people can keep in mind to help them emerge from the divorce process with a solid plan to prepare for the future.

In some cases, people may negotiate the distribution of their retirement plans as part of the property division process. This is especially true when both spouses work and maintain retirement funds through their jobs. Both people may simply agree to keep their own retirement funds. However, this is much more complex when one person was the main retirement saver or if one spouse was a stay-at-home parent. Like other types of property, retirement funds that existed before the marriage are generally not eligible for division, but the additional money saved during that time is considered part of the marital property. This means that the retirement impact can be relatively small after a short marriage and large after a lengthy one.

In order to successfully divide a retirement account, it is necessary to pay close attention to the requirements for handling these types of tax-protected and heavily regulated accounts. A qualified domestic relations order, or QDRO, must be obtained from the court; the divorce decree itself is not sufficient to divide a retirement fund without significant tax penalties.

People who decide to divorce may need to restructure their retirement plans in order to save more efficiently for the future. A family law attorney may provide advice and guidance throughout the divorce process, including recommendations for how people can best protect their assets during property division.