Managing asset division and retirement funds in divorce
Arkansas residents should understand how to properly address retirement assets during a divorce.
Couples in Arkansas who must struggle through the challenges of divorce understand how this experience touches every part of a person’s life. For families with young children, some of the most angst-filled decisions will be those that relate to the care and custody of their children. For people nearing retirement age, concerns about precious retirement assets may take top priority.
Experts will agree that careful management of retirement assets during a divorce should be a focus for all divorcing couples, not just those in their 50s or later. These funds can represent large, sometimes the largest, portion of a couple’s estate. This makes them a critical part of any property division settlement.
The Huffington Post notes that before making the rash decision to keep a family home, consideration should be given to obtaining or keeping a retirement account instead. The former will come with maintenance, tax and potential capital gains costs down the road. The latter will provide a future income stream.
How can retirement accounts be split?
If the decision is made to split a retirement account between the husband and the wife, managing this carefully is important. If the right steps are not taken, Bankrate notes that people can find themselves losing as much as one-tenth of their savings in the form of early withdrawal fees. This happens when tax entities do not understand the distribution to be related to the divorce order and instead believe a person is simply trying to get retirement money early.
Investopedia explains that there are specific process and forms that should be used to call out any transfer of funds from a retirement account as pursuant to a divorce decree. For a 401k or 403b fund, a Qualified Domestic Relations Order will achieve this goal. For any form of Individual Retirement Account, the use of a transfer incident to divorce should occur.
Careful delineation about which spouse should receive what portion of an account also matters in preserving the value of the asset. All settlements should dictate account splits by the percentage to be received. For example, a division should identify 70 percent to a wife and 30 percent to a husband or 50 percent to both spouses. Such percentages will be maintained even during market fluctuations.
Always work with professionals
Anytime that divorce is an option, couples in Arkansas should seek legal assistance. There are many nuances to the laws that can make a big difference in losing or keeping valuable assets.
Keywords: divorce, assets, retirement, property, division