When dividing up assets in a divorce, most people consider the house, cars, family business, cash and investments. However, it is not uncommon for divorcing couples not to realize the rights and obligations they may have regarding retirement accounts. This is especially common in instances where one spouse worked as a homemaker, instead of in paid employment.
ABC13 reports that 401(k) accounts remain one of the most fought-over assets in a divorce. In fact, retirement plans played a role in 83% of divorces that became contentious.
How to divide the retirement account
Some couples feel eager to divide the assets and get the process underway. Unfortunately, acting too quickly may result in taxes and penalties for withdrawing funds from retirement accounts. Instead of incurring unnecessary tax burdens, it is typically recommended to get a Qualified Domestic Relations Order (QDRO). This document spells out what accounts get divided, under what terms, how much to transfer, and what happens to the amount once received.
What to do about pension plans
Pensions plans are often a big part of retirement planning for people throughout Michigan. A pension may also be be subject to division during a divorce. As with other retirement accounts, a QDRO can help accomplish an equitable division. Unfortunately, pension plans often create some difficulty when it comes to determining the cash value. Matters become even more complex if the individual who owns the account began to accumulate pension benefits prior to marriage.
If you have questions about property division in a divorce, do not hesitate to seek legal guidance from an attorney with experience in the division of complex assets.