What Happens to my Retirement in a Divorce?
One of the biggest concerns clients have when divorcing is what will happen to their assets. For most, their 401(k) retirement account is one of the most valuable assets they own. Below are a few guidelines regarding how marital property is divided in a divorce:
- Every jurisdiction is different, so it is important to confer with a local family law attorney to discuss your case. However, if you live in a community property state (Florida is an equitable division state), the property and debts acquired during your marriage are considered community property and they will be divided equally between you and your spouse during divorce. Thus, if you made contributions to your retirement account during your marriage, those contributions are community property.
- If you live in an equitable distribution state, like Florida, your marital assets (including retirement accounts) will be divided in an equitable or fair way. This does not necessarily mean the split will be 50/50, but the presiding judge will divide the property in a fair way.
- It is important to understand that you and your spouse can negotiate an agreement regarding how to divide your assets. Thus, you can negotiate to keep your 401(k) as part of your divorce settlement agreement. This may require you to make a trade-off with your spouse. For example, she gets to keep the marital home and you get to keep your retirement accounts.
- When it comes to retirement accounts, it is important to understand the tax implications and how to best handle the retirement funds in your divorce case. It is also important that you discuss whether a lump-sum payout on retirement benefits is a good idea or not.
- If you and your spouse reach an agreement regarding how to divide your 401(k), you will need a Qualified Domestic Relations Order (QDRO). This is a specialized type of order and you should work with an experienced attorney to ensure it is handled properly.
- If you and your spouse cannot negotiate a settlement in dividing your assets in your divorce, the court will have to make the final determination. This can be risky because the law requires the court to consider a variety of factors in making its decision. Many times neither party is happy with the end result, so it is typically smarter to try to work it out through mediation or collaborative proceedings.
Contact the knowledgeable attorneys at the Men’s Divorce Law Firm. Our office is located in Orlando, Florida, but we proudly serve husbands and fathers across the State.