Spouses who have worked diligently and made intelligent financial decisions may have an extensive marital estate. They may own real property and vehicles. They may also have well-funded retirement accounts intended to support them during their golden years.
People contemplating a high-asset divorce may worry about preserving specific resources during their divorce proceedings. Concern about retirement accounts is common, especially in cases where spouses are close to retirement age when they decide to end a marriage. Thankfully, with appropriate strategies, people can often preserve retirement resources when they divorce.
Dividing accounts isn’t mandatory
Generally speaking, any savings accrued during the marriage are likely subject to division. However, there is no property division rule specifically requiring that spouses split every single asset they share.
A spouse who has diligently funded a 401(k) throughout the marriage can ask to retain their retirement savings when they divorce. They may simply need to make concessions in other aspects of property division that account for the value of their retirement savings.
Paperwork can prevent other losses
When individuals use tax-deferred retirement accounts to save for their golden years, they are vulnerable to income tax obligations and a 10% penalty if they withdraw funds before retirement age.
In cases where spouses must split a 401(k) or similar account, they may need to have a lawyer draft a qualified domestic relations order (QDRO). The proper execution of a QDRO can protect retirement savings from penalties and sidestep income tax consequences.
The specifics of a marital estate, the age of the spouses and other factors influence the best strategies for preserving retirement resources during a divorce. Working with an attorney to identify personal goals can help people set themselves up for the best life possible after ending a marriage.
