401K Plans - IRA - Retirement Plans - In Divorce

    In a long term marriage - ten years or more, a divorced spouse can potentially get higher social security benefits upon retirement.

Types of retirement plans divided in a divorce  

    All retirement plans, no matter what type or form, may be marital property.  This includes 401K, IRA, Roth IRA, Annuities, and other types of deferred compensation plans. That means you or your spouse will have to split the plan.  It does not matter if the other spouse never worked a day - the plan is still marital property.

How Much of the 401K or retirement plan is Marital?

  The entire retirement plan is not necessarily marital.  Only the amount of value accrued, or built up during the marriage is marital. Amounts build up before the marriage are not marital.  The years you simply lived together do not count.  Only years actually married qualify.

  The courts have come up with some established ways to determine the marital portion of a 401K or other type of retirement plan.  Two phrases that describe the way the courts handle the determination are the " time rule " and the " coverture fraction. "  These two are essentially the same.  The exact formula can vary depending on the exact situation.  But one example used by the court in a recent case follows:

Coverture or Time Rule - for Dividing Pension Plans

  The numerator should represent the number of months in which marital labor was devoted to earning the retirement account. The denominator would be the total number of months in which the retirement account was earned.  The resulting fraction multiplied by the total present value of the retirement account is the marital portion - to be divided in the divorce.

 

How pension plans are divided without tax penalty

   Most plans cannot be divided or liquidated without severe penalties.  This problem is addressed with a special document called a QDRO - Qualified Domestic Relations Order.  A QDRO is a special type of order, signed by the judge, that directs the retirement plan administrator to divide the plan payout at some time in the future.  The word "future" in this case is the normal date in which payments would be made without penalty.  Both spouses must wait until that future date for their payment.  A QDRO is sent to the plan administrator and is binding upon them.  Because arrangements to split the 401K or IRA are already in place, there is no reason for you to deal with your spouse in the future.Your attorney or an outside service can provide the QDRO document, ready to present to the Court.

Divorce can be the single most important event in your life.  Make sure you gather lots of information so you can make informed decisions.  Many people can benefit from the advice of a good, honest, loyal divorce attorney.  The Divorce Center can provide a divorce attorney that can help you protect yourself.  A lawyer is not an expense in a divorce case - they are an investment. We help clients in Hernando County, Pasco County, Pinellas County, and Hillsborough County. Our service area includes Tampa, Clearwater, Largo, New Port Richey, Brooksville, Dade City, and the New Tampa area. CONTACT US NOW or call 888-469-3486