For many, protecting their retirement funds from excessive taxation is one of the most important things in their lives. However, all that can quickly take a back seat when a divorce occurs. During a divorce, especially in a state like Georgia where there is equitable distribution of marital property, you’ll probably have to deal with the division of your retirement accounts. This includes everything from your 401(k) plans to IRA funds. There are various ways to distribute these assets, and understanding the options will help you prepare.
Pensions and 401(k) plans in a divorce
Understandably, these are two of the retirement accounts most commonly asked about when it comes to marital property division. This topic can be quite complex due to the number of possible factors involved. For example, because 401(k)s and pensions often have restrictions regarding when access is permissible, officially dividing these assets may not be possible until both parties reach retirement age. The division of these accounts requires a Qualified Domestic Relations Order (QDRO) separate from the divorce decree.
Dividing IRA assets
Although it may seem more difficult, splitting IRA assets is actually much more straightforward. Contributions made to an IRA during a marriage are marital assets suitable for division. The best route to take is to go through a trustee-to-trustee transfer. This is actually a good option for most people as it provides those under 59 ½ years of age the ability to transfer funds without the 10% early distribution penalty.
In a divorce, taxes and retirement accounts can be complicated matters to handle on your own. That is why it’s important to have the right legal team behind you throughout the entire process. Legal representation could give you peace of mind that you’re getting what you deserve without unnecessary tax penalties.