Dividing A 401(k) Account During Divorce
Splitting up marital assets often proves to be one of the most difficult aspects of divorce, especially when the nature of those assets is complex. For example, 401(k) accounts are often held by only a single spouse, but could still be subject to division upon finalization of their divorce. Fortunately, there are a number of ways to go about dividing these kinds of assets, so if you have questions about the fate of your own retirement plan during divorce, feel free to reach out to our legal team today.
Splitting the 401(k) Account
Some couples decide to divide their 401(k) down the middle. Unfortunately, the process of doing so is quite complicated. The parties will, for instance, need a court order allowing them to perform the 401(k) split without incurring taxes or fees for early withdrawal. These orders outline payment details, like how much a person will receive in the split and when he or she can expect to receive it. Speak with an experienced attorney for help determining whether this is the right course of action for your family.
401(k) Asset Exchange
Another way to deal with a 401(k) account during divorce is for one spouse to exchange his or her portion of the account for another asset of equal value. If, for instance, a couple’s 401(k) account is valued at $100,000, then one spouse could keep the entirety of that account, while the other could retain other assets worth the same approximate value. Outright exchanges are one of the easiest methods of handling the division of a 401(k) account during divorce.
Partial or Total Liquidation
Divorcing couples with a 401(k) account can opt instead for the partial or total liquidation of the account itself, followed by a cash payment to the spouse not named on the account. This method, while similar to splitting the account, is a lot simpler, although it can come with significant tax repercussions.
Transferring a Portion of the Account
It’s also possible for divorcing couples to transfer a portion of a spouse’s 401(k) account. There aren’t usually tax consequences for rolling a 401(k) over in this way, which makes it a popular option for a lot of divorcing parties.
Divorce and Your Retirement
It’s important for divorcing couples to know that when it comes to 401(k) plans and dividing assets during divorce, they have a lot of options. There are, however, some financial and tax repercussions that go along with those options, so if you and your spouse have decided to divorce and you have a 401(k) plan and other retirement assets, feel free to call us and set up a meeting with experienced Fort Lauderdale property division attorney Sandra Bonfiglio, P.A. You can reach us by calling our office at 954-945-7591 or by completing one of our brief online contact forms. A member of our legal team is standing by and eager to get started on your case.