Dividing Retirement Plans In Divorces
You spent years, maybe decades, planning for your retirement. Unfortunately, a divorce can put those plans on hold.
Retirement accounts, at least the portion accumulated during your marriage, are marital property and are subject to equitable distribution. At Bull & Reinhardt, PLLC, in Asheville, North Carolina, our attorneys can provide guidance on how to keep everything you are entitled to from retirement savings such as pension plans and 401(k) and IRA accounts.
Identifying And Resolving Potential Complications
An array of potential complications arises in the division of retirement accounts. Here are just a few examples:
- The portion of a retirement account contributed prior to your marriage is considered your separate property (not marital) along with any passive gains and earnings during the course of marriage. For this reason, the current marital value of your retirement account shouldn’t simply be divided by the percentage of years you were married. For example, you may have front-loaded your account by contributing more during the years prior to your marriage. Properly calculating your separate interest versus the marital interest in your retirement accounts can save you tens of thousands of dollars in equitable distribution.
- While traditional employer-provided pension plans are more rare these days they should not be overlooked, especially if your spouse has one. Pension plans should not be calculated or divided only according to the current value shown on a quarterly “estimated” statements, as the actual distribution value of a pension plan may be significantly greater in the future and the statement you saw may only show currently vested amounts. If your spouse has a pension, like many North Carolina teachers and government employees do, it is important to have it properly evaluated by one of our retained experts.
- If you are attempting to divide marital assets by trading retirement accounts for equity in other assets of seemingly equal value, you may be selling yourself short. Funds in an IRA or 401(k) account are not equal in present-day value to funds in a savings account, checking account or money market account. When you take into consideration withdrawal penalties and taxes, the IRA or 401(k) funds are valued substantially less than the funds in a nontax deferred account, such as a checking or savings account. This is also true when attempting to trade out equity in hard assets such as a house compared to a retirement account.
Our attorneys will often use experts to calculate the true value of your retirement assets taking into account present day valuations and tax impacting. Once we have properly valued your retirement assets, we will work to protect your financial interests.
Formally Dividing Your Assets
The process of dividing your retirement assets depends upon the type of retirement plan. Most employer-sponsored retirement accounts are considered qualified employee benefit plans and subject to the federal rules and regulations of ERISA and as such, a Qualified Domestic Relations Order (QDRO) is usually needed to direct what portion is paid to the ex-spouse of the employee and establish a separate account for the “alternate payee” or ex-spouse of the employee. In contrast, traditional IRAs can often be divided by agreement using internal elections and rollover forms. However, some IRA plans require a court order, often referred to as a Domestic Relations Order (DRO). Our attorneys understand these complexities to effectively negotiate, argue, and include proper language in a marital property settlement or equitable distribution order to protect your interests.
Consult With An Experienced Equitable Distribution Lawyer
When the security of your retirement is at stake, an experienced lawyer can help ensure that you receive what you deserve. Contact our Asheville office by calling 828-348-8053 or reaching out to us online.