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How Divorce Affects Retirement Benefits

How Divorce Affects Retirement Benefits

Protecting, transferring, and dividing IRAs, 401(k)s, 403(b)s, pensions, and other benefits

Do I have to share my retirement benefits with my spouse if we divorce?

Generally, yes.

Parties routinely accumulate retirement benefits during a marriage, including IRAs, 401(k)s, 403(b)s, pensions, and other benefits. To be considered a marital asset, these benefits or accounts must be vested on the date you file for divorce. Once it has been determined that the benefits are marital assets, they are subject to the presumption that they should be divided equally between you and your spouse.

The court will use the value of your account as it was on the date of filing; however, the judge has discretion to use any value between the date of filing and your divorce. Why? Because, after you file for divorce, there may be instances that affect the value of an account. This includes gains or losses due to fluctuations in the stock market.

Qualified Domestic Relations Orders

When dividing an IRA between spouses, most institutions have simple forms that allow you to transfer some or all of the account to your spouse. When dividing a 401(k) or pension, the transfer is more complicated. It usually requires the use of a Qualified Domestic Relations Order (QDRO) that has been approved by the plan administrator.

A QDRO can be complicated, and you should consult an attorney if you need to transfer money using this type of order. The money transferred to a spouse via a QDRO is usually subject to the same restrictions on withdrawal as the original account.
Some retirement plans in Indiana and other states do not allow transfer by a QDRO. This presents difficult questions about how one spouse can get his or her share of the retirement account in the divorce, and your attorney should help you address the options.

Making payments to your spouse

Traditional pensions that are paid out to a spouse upon retirement can be reduced to a present value for purposes of dividing the asset in the divorce. To help determine your right to receive pension payments in the future, BB&C employs an actuary to calculate a present value of the assets. This is helpful if your spouse does not want to give up any of his or her pension and would rather pay your share with other marital assets.

If you bring retirement accounts or benefits into the marriage, then you can make the argument that the amount brought into the marriage should not be included in the amount to be divided by the court.

There also can be tax implications regarding which retirement accounts might be better for one spouse to seek in the divorce. Before entering into a settlement agreement, you should seek the advice of a tax professional and/or financial planner to determine which option is best for your circumstance.

If you plan to file for divorce and have questions about your retirement benefits, contact Kisti Good Risse at 765-742-9066.

The content of this blog is intended to be general and informational in nature. It is advertising material and is not intended to be, nor is it, legal advice to or for any particular person, case, or circumstance. Each situation is different, and you should consult an attorney if you have any questions about your situation.

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PARKING NOTICE: The sidewalks and curbs around the Columbia Center will be under construction through June 2023. Traffic patterns may change and street parking will be limited during construction, so we encourage you to park in the garage attached to Columbia Center. The entrance to the Parking Garage is on Fifth Street, and you may park in any spot not marked Reserved. There is a parking garage elevator you can take down to the 1st floor where the BB&C offices are located. Please inform a BB&C staff member that you are parked in the garage, so we can validate your parking during your visit to the office. We apologize for the inconvenience and appreciate your patience and understanding during the construction.

The sidewalks and curbs around the Columbia Center will be under construction through June 2023.