Disclaimer: This article does not constitute legal advice. If you have any questions about your individual situation it is best to seek the advice of an experienced legal professional.
Dividing your retirement accounts is recognized as one of the trickiest aspects of divorce. With the rise of DIY divorce, those with complex assets or people who have been married for a long time are advised to stay away from “DIY” solutions. There is a specific process for dividing your retirement accounts, and if you don’t follow the rules you could lose money.
What is the Correct Approach to Dividing Retirement Funds in Divorce?
The right way to divide retirement accounts in a divorce is to work with a highly qualified professional, such as a divorce mediator with financial expertise. To divide retirement accounts in divorce you need to follow the rules for dividing retirement accounts and the rules and processes in your state. When you divide your retirement accounts in your divorce you will have to fill out forms that notify the divorce court that your retirement account division is a part of your divorce process. Like other assets that are divided in divorce, retirement accounts can be transferred tax free. If you don’t fulfill this process correctly you could owe early withdrawal fees and there can be other consequences, such as the receiving spouse being unable to rollover the retirement funds to an IRA or another account and get the deferred tax benefit.
What is a QDRO? What is a Transfer Incident to Divorce
The most important thing to remember is that there are different rules about how you divide different types of retirement accounts. You will need to follow a separate process for each if you have multiple types of retirement accounts. This is often true for high earners, key people, CEOs and executives who have multiple different retirement accounts because of contribution limits imposed on highly compensated people.
For example, if you have a qualified plan such as a 401K or 403(b) the process for dividing your retirement account is called a QDRO or Qualified Domestic Relations Order. If you have an IRA, your retirement account is subject to a process called a transfer incident to divorce.
As a highly paid professional you may also have other retirement vehicles that aren’t traditional retirement plans, such as investments or annuities
It’s important to work with a highly qualified professional divorce mediator to understand the tax consequences of these decisions in your divorce and to submit all details correctly.
Our Services And How We Can Help
At Divorce Options San Diego, we are a full service divorce mediation firm who help divorcing spouses with their divorce planning and transition through all stages of the process. This includes working with divorcing spouses to find the optimal way of dividing their community property. We also provide support for the form-driven California divorce process, which includes full documentation services to help you file all documentation correctly.
We streamline the divorce process and provide a thorough analysis of complex assets so your divorce plan is as efficient and tailored to your situation as possible. If you have a mixture of traditional and non-traditional retirement assets for example, we look at these assets as part of the overall picture of your community property, so you can make the right decisions to secure your future. We mediate with divorcing spouses in person or remotely, depending on your comfort and convenience. We often work with spouses living internationally or out of state, or who have multiple different residences and/or work remotely. We have offices in San Diego, CA, Silicon Valley, CA and Berkeley, CA. Please contact us to learn more about our West Coast Divorce Mediation services.
