When older couples divorce, retirement accounts get called into question. We can help protect your assets.
When couples who are older divorce, they face unique challenges related to their retirement savings. Typically, couples nearing retirement or are retired don’t need to worry about child custody or child support issues. However, they do need to be concerned about how they will split their retirement assets. With the cost of living and healthcare costs on the rise, ensuring that you have enough assets and income to enjoy your retirement after a divorce is crucial.
Along with a shared marital home, a couple’s retirement accounts are among the most sizable assets involved in a Georgia divorce proceeding. Dividing retirement accounts, including IRAs, 401(k)s, and pensions, is a complicated process. If you are a Gwinnett County resident concerned with your retirement account division, you need anexperienced divorce lawyer on your side. Contact Banks, Stubbs & McFarland LLP today to consult with one of our experienced divorce lawyers.
Property division is a crucial point of contention when empty-nesters file for divorce in Gwinnett County. In many cases, a couple’s joint and separate retirement accounts are among the most valuable assets they own. The first step in dividing retirement accounts during the divorce process is categorizing property as marital or separate property. Courts will determine whether the following types of retirement accounts are marital or separate property:
Typically, all property acquired by either spouse during their marriage is considered marital property. Courts have the authority to divide marital property among the divorcing spouses. However, courts cannot divide a spouse’s separate property. Separate property includes any property one spouse owned before the marriage. Gifts from third parties and inheritances are given to one spouse during the marriage are also considered separate property.
Categorizing retirement accounts and pensions as marital or separate property can be challenging. For example, if one spouse contributed to a military retirement account before the marriage, a court will typically consider that account separate property. However, when one or both spouses contribute to a retirement account during the marriage, courts usually consider the money in these accounts to be community property. Once the court has determined which property constitutes marital property, they can begin the equitable division process.
After all of the couple’s retirement accounts have been located and identified as marital or separate property, the court will divide marital property equitably between the divorcing spouses. The property division isn’t equal, meaning the court won’t divide the marital property in a 50/50 split. Instead, Georgia courts use a process called equitable division. Family court judges consider a variety of factors to determine how to divide up the couple’s marital property, such as:
The court will categorize retirement assets into two main categories: defined benefits, such as government pensions, and employer-provided benefits. In defined contribution accounts, the court can determine the balance in the account on a specific date, making the division process easier. When it comes to defined benefit plans, determining the value involves a more complicated formula.
Courts also consider the tax consequences of dividing up retirement accounts. When a person takes money out of retirement accounts, they will often need to pay income tax. Taking money out of accounts could also trigger a 10 percent penalty. One way divorcing spouses can avoid the early-withdrawal penalty is to receive a Qualified Domestic Relations Order or QDRO.
QDRO provides an ex-spouse the legal right to receive a portion of his or her ex-spouse’s retirement plan. QDROs must satisfy multiple technical and complex rules, and they must specify the number of payments necessary or the amount of time the QDRO will last. Lawyers must use different forms depending on whether the QDRO is for a defined contribution or defined benefit plan.
Sometimes our clients assume that they should divide a retirement account equally. However, doing so could cause significant problems. Suppose the QDRO for your 401(k) specifies that one spouse is entitled to $50,000 of a retirement account worth $100,000. Should the overall value of the 401K decrease to $50,000 before the QDRO is filed, the account will not end up being divided equally.
A QDRO will state the amount of the retirement assets to which one spouse is entitled. However, spouses may need to wait before they can withdraw assets from the retirement plan. Each pension plan has a different set of rules, and a spouse can only acquire pension assets when authorized. In these circumstances, a family court might award a spouse additional property in place of the pension, especially when the pension payment won’t occur immediately.
Many spouses will attempt to negotiate a divorce settlement outside of the court process. Working with an experienced lawyer can help you negotiate a fair settlement. Your lawyer will inform you of any tax implications that could affect the amount of money you receive after the property division. For example, your settlement agreement should clearly state that the division of retirement accounts will be a tax-neutral transfer to a qualified retirement account designated by the spouse receiving the assets. Otherwise, the earning spouse could face a significant penalty.
You do not want to get into the courtroom only to find that your legal counsel doesn’t have the experience you require them to have. Sex crimes are complicated, and in the state of Georgia, you’ll want every ounce of experience you can possibly get when it comes to those defending you.
Consulting with an experienced Gwinnett County divorce lawyer will help you avoid common pitfalls when dividing your retirement accounts. Your lawyer will ensure that you understand the QDRO process and help you petition the court for a fair division of your assets. If you need legal assistance navigating a divorce that involves retirement assets, contact Banks, Stubbs & McFarland LLP today to discuss your legal options and how we can represent your best interests.
We are located in Suwanee Georgia, but we defend clients throughout Gwinnett County, Forsyth County, Hall County, Barrow County, Jackson County, and Dawson County. Contact our Suwanee law firm as soon as possible to learn how we advocate for your best interests.