If you’re going through a divorce, dividing retirement accounts like 401(k)s and IRAs can get complicated. These accounts often hold years of savings, and both you and your spouse may have legal claims to them.
What counts as marital vs. non-marital retirement funds?
In Florida, any funds you or your spouse added to a 401(k) or IRA during your marriage count as marital property. This rule applies even if the account has only one name on it. Contributions made before your marriage count as separate property and don’t get divided. However, if those pre-marriage funds grew in value during your marriage, the increase may be subject to division.
How are retirement accounts divided?
Florida uses equitable distribution, so the court divides marital assets fairly, but not necessarily equally. If both of you agree on how to divide the retirement accounts, the court usually approves the agreement. If you can’t agree, the judge looks at factors like the length of your marriage and each person’s financial standing to make a decision.
To split a 401(k), you need a special court order called a Qualified Domestic Relations Order (QDRO). This document allows the plan administrator to divide the account without triggering taxes or penalties. IRAs don’t need a QDRO, but you must transfer them carefully to avoid tax consequences.
What happens if you don’t divide them?
If you leave retirement accounts out of your divorce, you could miss out on money you’re entitled to receive. Make sure you include all retirement accounts when listing assets during divorce proceedings. This helps ensure a fair division.
These accounts can make up a big portion of your financial future. An unfair division of retirement accounts can affect your retirement plans. Understand what you have a right to before finalizing the divorce.