One of the more important -- and often overlooked -- aspects of a Pasadena divorce is the division of retirement assets. Splitting up these assets can be one of the trickiest parts of a divorce. Great care must be taken in order to avoid any unnecessary tax penalties and to guarantee future financial stability.
Here are a few tips to keep in mind regarding the division of your retirement accounts during a divorce:
- Funds can't be transferred before the divorce is final or they will be subjected to a ten percent early withdrawal penalty if the owner of the account is younger than 59-1/2.
- Trustee to trustee transfers are only tax free if they are specifically required by the divorce decree. Transfers used for temporary support are taxable, so this should be avoided if at all possible.
- To protect the original owner of the account, the Qualified Domestic Relations Order (QDRO) should specify that the spouse receives a percentage of the assets. If it specifies a dollar amount and the account declines in value, the original owner is left with inadequate funds for his or her retirement.
- If you are the owner of the account, don't forget to formally change the beneficiary designation after your divorce. Don't assume that this will automatically be done on your behalf or that changing your will is enough to make your intentions clear. The account managers have to follow the listed beneficiary designation, even if your will states otherwise.
- It is vital that you get in the habit of keeping accurate records regarding the value of your retirement accounts, especially if you've changed jobs a few times and have multiple accounts to consider. Overlooking accounts can have serious long-term consequences.
How Can We Help?
Please call our office at (626) 683-8113 or email us at info@PasadenaLawOffice.com if you have questions about how your retirement assets might be affected by your divorce. Our Pasadena divorce attorneys can help make sure that the settlement you receive is in line with your long term financial goals.