Spouses preparing for divorce have a lot of financial matters to address. They may own a home together. If either spouse has a well-paid job, then the chances are good that they may have begun saving for retirement. Retirement savings accounts are important for financial stability after people stop working full-time. They can also quickly become a source of frustration and contention in a pending divorce.
What issues related to retirement accounts commonly cause divorce complications?
Disagreements about what is divisible
Frequently, the spouses may find themselves disagreeing about whether or not the retirement account is subject to division and how much of it is part of the marital estate. Typically, spouses have to share whatever contributions they made during the marriage.
Even if the account is in the name of one spouse and the other never deposited income in the retirement account, what they accrued during marriage is still subject to division. Looking at account records can help spouses determine that how much of their retirement savings are subject to division and how much may remain the separate property of one spouse.
Uncertainty about how to split an account
There are a few options for dividing retirement savings in a divorce. The simplest, most straightforward solution is typically to directly divide the account. Either the spouses or the judge hearing their case can determine that each spouse receives a certain portion of the overall account balance.
After the courts approve a final property division order, the spouses can have an attorney draft a qualified domestic relations order (QDRO). That document can guide a financial professional as they attempt to divide the account. When handled appropriately, a QDRO allows for the penalty-free division of retirement savings.
Other times, once the spouses know how much of the account is subject to division, they can negotiate with one another to offset that amount with other marital property. Spouses may disagree about whether actually splitting the account is necessary. Establishing how much of the account is marital and the most appropriate way to divide those funds can sometimes lead to conflict between spouses.
Individuals who know what to expect during property division proceedings can potentially minimize disputes that arise during divorce. Retirement accounts and other valuable financial assets require careful consideration accordingly.
