When married couples in California decide to get a divorce, they often forgo hiring an attorney in order to save money. While some assets may be easy to divide without any legal assistance, splitting retirement accounts, especially pensions, can be very tricky. Without the relevant knowledge, one or both parties could receive far less than they anticipated due to large tax bills and penalties. Divorce lawyers know how to split accounts so that they aren’t subject to these costs.
In order to avoid tax bills and penalties when dividing up IRAs, 401(K)s and other tax-deferred shielded retirement accounts, attorneys can arrange a qualified domestic relations order (QDRO). This type of agreement is filed in conjunction with a divorce so that money can flow freely from one ex-spouse to another. Dividing up pensions requires the greatest legal expertise since each one has a unique set of rules.
Lawyers who work on dividing pensions for divorced couples often spend more time cleaning up messes than anything else. Ex-spouses often find out that they’ll be getting nothing for months or years after a divorce has been filed, and sometimes a spouse gets nothing when their ex-partner dies after a divorce is finalized but before a QDRO is filed.
Couples who are going through high-asset separations can avoid a lot of hassle and confusion by hiring a lawyer. An attorney who knows the tax and penalty rules related to retirement plans can file the documents needed to make sure both couples get what they expect. Legal counsel can also recommend other types of asset exchanges that satisfy both party’s interests.