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The Effects of Divorce on Your Retirement Accounts
Aside from the obvious emotional effects a divorce can have on a couple and their family, there are also financial consequences. When it comes time to split up the money, any retirement accounts will be included in the equation. But how do you determine who gets what?
January 07, 2012 /Law and Legal PR News/ -- The Effects of Divorce on Your Retirement Accounts
When couples get married, they do so with the hopes of growing old together, and growing old together can mean planning for retirement. As we all know, however, not every marriage lasts. Aside from the obvious emotional effects a divorce can have on a couple and their family, there are also financial consequences. When it comes time to split up the money, any retirement accounts will be included in the equation. But how do you determine who gets what?
Easier Said Than Done
If couples do not have a prenuptial agreement in place, a divorce can become quite complicated. While some aspects can be simple, such as deciding who gets the silverware or the bedroom furniture, splitting other assets can be quite difficult. Determining how to split a retirement account such as a 401(k) can be tricky. And if it is not prepared carefully, the language in a property settlement can ultimately lead to an unfair split.
What Can Go Wrong?
It is very easy to make a mistake when splitting up retirement accounts. Due to fluctuations in the market, the value of a 401(k) can change dramatically from year to year. Therefore, when a property agreement is prepared, the language should be specific. If the couple agrees that each party is entitled to half of the account, the language should reflect this as a percentage, not half the value of the account at the time it was prepared. A fixed percentage protects against swings in market values.
What Can Be Done to Ensure You Get What You Deserve?
When a property agreement is made, it is not a guarantee that each spouse will receive the portion of the retirement account that was agreed to. Preparing a Qualified Domestic Relations Order (QDRO) is the safest bet to ensure that each party gets what is outlined in an agreement. Be advised that most retirement plans cannot make payments to a former spouse until a proper QDRO has been entered by the court and approved by the employer.
If you have questions about divorce and how it may affect your retirement accounts, contact an attorney with experience in asset division and property settlements.
Article provided by Mullins Law Firm
Visit us at www.mullinslaw.net
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