Divorce can take a toll on your emotions as well as your finances. You and your ex will have to agree on how your assets will be divided. This includes your 401(k) and other retirement accounts. It can be challenging to come to an agreement, but you need to have a plan to minimize your taxes so that you can keep as much of your retirement savings as possible. If you’re a Florida resident going through a divorce, here are some tips for preserving your 401(k).
How are 401(k)s divided in a divorce?
The way you and your ex-spouse will split your 401(k) depends on a few factors, such as the balance of the account, where you live, additional marital assets and government taxation laws. Most U.S. states adhere to equitable marital property law. This law mandates that the property is divided fairly, but it doesn’t always mean the assets will be split 50/50. However, in community property states, marital assets are divided equally.
Any funds you invested in your retirement account before marriage are not considered marital property, so you don’t have to split these funds in a divorce. If one spouse has a significantly larger retirement account than the other, the courts may require the spouse with more savings to give some of the money to the other spouse. However, this doesn’t necessarily mean you’ll have to liquidate your 401(k) and give part of the money to your ex.
Splitting your marital assets
Before you can devise a plan for dividing your assets, it’s important to know how much your marital assets are worth. Both you and your soon-to-be-ex should get summary plan descriptions of your 401(k) and any other retirement accounts before your divorce settlement is final. Get in touch with your plan administrator so that you’ll know the rules pertaining to your 401(k). You’ll also have to draft an agreement, which will be subject to your administrator’s approval.
The process of dividing retirement accounts can be complex and come with tax penalties if done incorrectly, so you’ll want professional help. Speak to an experienced family law attorney to walk you through the divorce proceedings and help ensure that your assets are divided as fairly as possible.