Retirement Assets and Divorce Property Division

Georgia residents can learn some of the unique and simple ways to help avoid some serious financial losses during a divorce.

Georgia residents can learn some of the unique and simple ways to help avoid some serious financial losses during a divorce.

Georgia spouses who face the unfortunate reality of divorce know the wide range of emotions and options for loss that exist through the process. While many of the challenges cannot be completely avoided, some of the losses can be minimized including when it comes to splitting retirement accounts during a divorce process. This offers some people the ability to save more of their assets and move forward in their lives in more positive manners.

Who is at risk?

Any person with a retirement account who is also going through a divorce is at risk of losing precious assets for a future life. Certainly the concerns about this rise with the age of the spouses as older persons have fewer years left to make up any retirement shortfalls. Data from a National Center for Family and Marriage Research was published by Forbes and indicates a big increase in the number of people beyond the age of 50 who are getting divorced in the United States these days.

What can happen to retirement assets?

The biggest risk to these funds is the assessment of early withdrawal penalty fees and associated taxes. This can happen if tax entities and other agencies do not know clearly that any split and disbursement of accounts were related to a divorce. If this happens, it can appear as though money was received in an effort simply to access retirement funds when they are not fully allowed.

What can be done to avoid these costs?

When a retirement account is deemed marital property and is therefore split during a divorce, one important process tip is to always utilize a Qualified Domestic Relations Order. The Tampa Bay Times and Fox Business both identify this as a highly beneficial document for its ability to make clear beyond a doubt that specific financial transactions are part of a divorce and therefore not subject to select assessments.

Proper reinvesting of all funds received from a retirement account disbursement is another critical step in protecting remaining assets from unnecessary loss. Unless these monies are legally allowed to be obtained for retirement needs, they must be reinvested into new qualifying accounts when initial accounts are split.

Forbes recounted the story of one spouse in California that received funds from a former spouse's 401K and opted to keep the money instead of reinvesting it. That decision led to the assessment of a large tax bill.

Professional input helps

There are many issues like these that can arise during a divorce. For these reasons, working with an experienced attorney is always recommended and can help people avoid unfortunate situations.

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