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Providing Solutions

Importance of fighting for retirement assets in divorce

| Jul 10, 2014 | Divorce |

According to a survey conducted by the Securian Financial Group, almost one-third of the divorced respondents did not get a share of their spouse’s retirement benefits in their divorce settlement, and they also reported being unaware that they were entitled to a portion. Like the survey participants, people in Texas might be missing out on the opportunity to protect their own retirement by allowing their former spouses to keep such accounts intact after a divorce is finalized.

Although some states only allow spouses to share in funds put into an account during a marriage, the amount accumulated after the wedding may provide both parties with an account that might continue to grow over time. Yet, many people focus on things like keeping the house despite real estate having an uncertain future value. According to experts, spouses should try to claim some retirement benefits and then roll over what they obtain into an employee-sponsored account if possible. Cashing out on a partner’s retirement savings might affect the assets value and might open the funds to tax penalties.

Focusing on retirement accounts might also provide a tax breaks for the person who is award a share. Unlike alimony, portions of certain retirement accounts might not be subject to taxes, making them more desirable in a divorce.

Once someone decides to pursue retirement benefits in a divorce settlement, an attorney could seek a Qualified Domestic Relations Order, which transfers retirement benefits to spouses without taxation within certain limits. An attorney could also assist with other aspects of property division to fight for a favorable settlement for their client.

Source: Forbes, “The Big Money Mistake Divorcing Women Make“, Kerry Hannon, July 03, 2014