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What happens to retirement accounts during divorce?

On Behalf of | Feb 7, 2024 | Property Division

When a couple goes through a divorce, their division of retirement accounts often becomes a focal point due to their substantial value and long-term impact on each party’s financial security. Florida’s laws and the nature of the retirement accounts in question play a significant role in determining the division of these assets.

This process can involve various retirement accounts requiring different procedures and legal considerations. Understanding how retirement accounts are divided in a divorce is, therefore, crucial for both parties.

Military retirement

In divorces involving military personnel, military retirement benefits are treated as marital property to the extent they were accrued during the marriage. The amount allocated to the former spouse depends on the duration of the marriage, the overlap with military service and Florida’s specific legal guidelines. Direct payments from the Defense Finance and Accounting Service are possible when a marriage and military service overlap for 10 years or longer.

Qualified retirement plans

For retirement plans like 401(k)s and pensions sponsored by an employer, a qualified domestic relations order (QDRO) is necessary for division. The QDRO is a legal document that grants an alternate payee, such as a former spouse, the right to receive a portion of the account holder’s benefits.

It must clearly outline how the benefits are divided and comply with the plan’s stipulations and federal regulations. This can ensure the division doesn’t incur penalties or adverse tax implications.

Non-qualified retirement plans

Individual retirement accounts (IRAs) are divided under a different process, a transfer incident to divorce. This process doesn’t require a QDRO.

The division is executed pursuant to a divorce decree or a written agreement by the divorcing parties. This method allows directly transferring IRA funds to the other spouse without tax penalties or needing a court order. It must be conducted in accordance with Internal Revenue Service regulations.

Navigating the division of retirement accounts during a divorce in Florida requires an understanding of state laws and the specific requirements for each type of retirement account. Seeking advice from financial and legal professionals is often necessary to ensure that division is conducted fairly and without triggering any unnecessary negative financial consequences.