In May we discussed the apparent uptick in divorces among people over the age of 50. While child custody and support issues can be involved in these situations, many more mature couples have significant property division issues that may need to be addressed. It is important for people (really at any age) who are seeking divorce to consider the less obvious assets that may be subject to division in a California divorce.
Retirement assets may often be included marital property, depending on the specifics of an individual situation. But, some people assume, or are concerned, that the nature of a retirement account bars division of the assets during a divorce. Tax considerations often deter people from considering retirement accounts in a divorce.
But, the law generally recognizes that the dissolution of a marriage involves dividing community property of the marriage, and when done properly, retirement assets can be divided associated with a divorce proceeding.
In some cases, a divorcing couple may be able to negotiate a resolution that does not require an actual transfer of assets from a retirement or pension plan. Some marriages may have prenuptial agreements that exclude retirement assets from the marital estate. Other situations may arguably exclude such assets. But, it may be necessary to split assets in a plan to reach an equitable distribution of marital assets.
When a workplace account is implicated, a legal tool known as a Qualified Domestic Relations Order, is used to help ensure that the retirement assets are properly distributed consistent with the divorce settlement.
Commentators say that a QDRO can be used in other situations as well. The idea of using a QDRO is important, as many Bay Area residents may understand, because distributions or transfers from a retirement account can incur significant tax liability if not properly handled.
Source: FOX Business, "How to Split up Retirement Assets in a Divorce ", Marilyn Bowden, Sept. 16, 2013