When you’re working out the terms of your divorce, it may seem like everything in your life has to be divided. Splitting up retirement plans has its own slew of complexities, including adhering to federal guidelines and taking on possible tax-related consequences.
You and your soon-to-be-ex can save yourselves a big headache if you can agree to keep your retirement accounts intact.
Just like any other marital property, retirement plans are subject to division through what is known as equitable distribution. Spouses who established a pension, 401(k) plan, or other retirement account during the marriage must share those assets during the divorce. However, you can keep these accounts intact if you trade other assets or come to an agreement to leave them be. To make it official, you can outline those terms in the separation agreement.
When You Can’t Agree
If you and your spouse do not agree to keep your own retirement accounts, it’s critical to employ the appropriate process to transfer these assets to avoid an immediate tax penalty.
Governed by the Employee Retirement Income Security Act, retirement plans are divided during divorce using a court order called a Qualified Domestic Relations Order (QDRO). A QDRO allows money to be transferred to an ex-spouse’s account without immediate tax consequences and without early-withdrawal penalties.
Petrelli Previtera Schimmel has a unique network of highly qualified specialists to provide you with the input you need to make the best decisions possible. We can work closely with certified public accountants who are familiar all divorce law affecting your financial situation. Certified financial planners and retirement evaluators will be able to examine your retirement assets and help you agree on terms that make the most sense.
If you have questions about dividing your retirement accounts during divorce, feel free to contact Petrelli Previtera Schimmel at (215) 523-6900.