Many individuals in California and elsewhere spend decades building up their retirement savings. Those who are facing a divorce may wish to know more about the role these assets could play in the subsequent process. Retirement assets can have a substantial impact on the outcome of a divorce and understanding the necessary steps to take to divide these assets could prove vital to avoiding potentially devastating tax penalties and early-withdrawal fees.
When dividing retirement assets in divorce, the steps to take to avoid unnecessary fees and penalties may depend on the type of retirement accounts involved. For instance, before attempting to divide defined contribution or benefit plans such as a 401(k), obtaining a Qualified Domestic Relations Order from the court is essential. A QDRO typically provides exemption from early-withdrawal fees and tax penalties provided the applicable assets are divide pursuant to the terms of the order.
Alternatively, one does not need a QDRO to divide retirement assets such as an IRA. However, these assets must be divided in accordance with the terms of the divorce decree. Since retirement accounts can be more complex in nature than other assets, those facing the end of a marriage could find it helpful to seek guidance in better understanding their rights and options early in the process.
Going through a divorce can be a stressful experience and the outcome of the situation could have a long-term impact on a person’s future. Those who wish to gain insight into how best to prepare for what comes next could benefit from retaining the services of a family law attorney. An attorney in California can address all a client’s concerns and assist in forming a strategy to protect his or her financial future during subsequent legal proceedings.