Your retirement is considered a marital asset and will be part of your divorce settlement. How these assets are divided depends on where you live. All courts are required to follow federal guidelines for dividing qualified 401ks but non-qualified plans such as IRAs, SEPs and so on are divided according to the laws of the state where you live.
Community property states usually require these assets to be split evenly while other states may give a larger share to the higher wage earner. Some retirement benefits are not considered community property. These include railroad retirement benefits, social security payments, compensation for military injuries and worker's compensation.
Retirement benefits that are subject to community property include military pensions, IRAs, Keoghs , ESOPS, 401k, and 403b plans. Some spouses who divorce might decide to keep retirement accounts intact but most agree to split these assets along with other property. There are some instances where a spouse can be given the other spouse's entire retirement savings in a divorce settlement.
Here are some pointers for splitting your retirement
assets if you divorce:
- Instruct your plan administrator to roll the agreed upon amount into a new account in your spouses name
- With a qualified plan , you also need to file a QDRO to allow your company to divide your plan
- Be sure to change your beneficiaries when your divorce becomes final
Questions to ask about retirement benefits before
your divorce is final:
- How many pension plans does your spouse have?
- How much has accrued in each plan?
- What information do you need in the court order or property settlement to have the pension plan pay benefits directly to you?
- Have you worded the order so that it clearly specifies the amount that will be paid to you?
- Does the order have survivor benefits so that you will continue to receive benefits if your ex dies first?
Making the wrong decisions about dividing up retirement benefits can cause serious financial difficulties, tax burdens, and/or fines. Where there is a division of retirement benefits included in a divorce settlement, experienced legal counsel should be used.