Retirement accounts in our economy can fluctuate up and down, but one thing remains the same. In a Florida divorce case, retirement that has been contributed to or earned during the marriage is one-half of the non earning spouse’s.
Divorce in Florida is based on a premise that everything collected during the marriage, including assets, debts and retirement accounts, are going to be split equally between the parties. The concept is known as equitable distribution and it’s different in Florida than in some other states.
In some states, if both parties have a retirement account, regardless of value, then each take his or her own.
In Florida, regardless of whether an account exists or should exist, the value of the accounts is what matters.
For example, if the Husband has a 401k with approximately $50,000 and the Wife has a 401k with an approximate value of $150,000, then their combined retirement is $200,000 (if all was contributed to and collected during the marriage).
So, the court will look to split the $200,000 between the parties and the Wife’s account may be depleted by $50,000 and rolled into the Husband’s account to make his total $100,000 and her total $100,000.
If there is a pension account, which is based on the number of years worked, then there is a calculation that has to be done to determine the other spouse’s portion of the pension.
What this means is that one must evaluate the number of years of the marriage and the number of years the pension-earning spouse has worked for the company.
Often the company provides a calculation to help in this process, but it will basically turn into a percentage amount for the spouse who does not have the pension.
Once retirement is awarded, the party that has received said retirement funds is responsible for having a Qualified Domestic Relations Order approved by the company with the account and then submitted to the court.
This should be done as soon as the divorce is finalized in case anything was to happen to deplete the fund after the dissolution of marriage.
The spouse that has the paying account cannot deplete the account without court approval, but if the funds are dependent on stock, then stock shares can change in a day and leave the account with less than what is owed to the other spouse.
In addition to rolling over the retirement account, the parties may reach an agreement for a pay out.
Early Distribution Without Penalties
Now there are ways to have this done in a 401(k) or IRA without incurring penalties for early distribution.
For example, if there is an agreement that a spouse is going to take $100,000 from the other spouse’s 401(k) to equal another asset the other party took, to pay lump sum alimony, or another settlement agreement, then it can be disbursed without the penalty, but taxes must be paid.
The idea is that a property settlement or settlement regarding the retirement accounts can be divided by the parties without the benefiting party suffering any penalties.
The IRS wants to make certain it is getting its cut since the disbursement is income.
What Can You Do?
It is wise to seek the guidance and expertise of an experiencedfamily law divorce attorney. They can ensure you do not sell yourself short, and give you peace of mind during this difficult time.
At Wood, Atter, and Wolf, as experienced divorce lawyers, we are driven to solving the most important problems created by divorce.
The proven methods we employ create a working environment that allows both parties to resolve their differences.