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How are Retirement Funds Divided in a Divorce?


Dividing assets is one of the most complex aspects of divorce. This is especially true for those with significant retirement savings, so if you are going through a divorce and your spouse is refusing to divide the contents of a retirement account, it is critical to contact a property division attorney who is well-versed in the nuances of dividing these types of assets.

Equitable Division  

In Florida, marital assets must be divided equitably during divorce. This does not mean that all property and assets will be divided equally. Instead, courts are ordered to make a fair and just division based on each party’s individual circumstances. For this reason, an ex-spouse is usually only eligible to collect a portion of the contributions that were made to a retirement plan during the marriage itself. Any contributions made after the marriage was dissolved or before the wedding will remain in the sole possession of the account holder. However, the exact process of division also depends on the type of retirement plan in question.

Defined-Benefit Plans 

One of the most common types of retirement accounts is the pension, where employers make regular contributions to a fund on an employee’s behalf. These types of pension accounts are known as defined-benefit plans because beneficiaries are guaranteed a specific sum of money if they meet certain requirements. Pensions can be paid in a number of different ways, including by installment or in the form of a lump sum payment upon retirement. Most defined-benefit plans allow ex-spouses to receive a lump sum payment of the contributions made during the marriage at the time of divorce. Alternatively, a party could elect to receive a payment from the plan at the time of retirement.

Defined-Contribution Plans  

Another popular type of retirement plan is the defined-contribution plan, which includes 401(k)s, IRAs, and Roth IRA accounts. Unlike defined-benefit plans, these types of plans don’t pay a specific sum of money, but instead allow an individual to set aside a certain amount for retirement in a tax-deferred account. In many cases, the beneficiary’s payments are supplemented by contributions from the employer. Upon retirement, the individual can begin withdrawing money from the account.

Defined-contribution plans are usually divided based on a predetermined formula that takes into account the balance of the account, as well as the percentage of vesting for the contents of the account at the time of the divorce. For example, if an employee had a pension plan that did not fully vest until 20 years had passed, but he or she filed for divorce after only ten years, the court would take the amount of the balance and multiply it by 50 percent because only half of the amount of time required for vesting had accrued. The total would then be divided down the middle. The ex-spouse could take his or her half, while the account holder could continue to increase the account balance.

Call Today to Discuss Your Case with a Dedicated Fort Lauderdale Attorney  

If you or your spouse have significant funds in your retirement account and you have filed for divorce, please call 954-945-7591 to schedule a free consultation with experienced Fort Lauderdale property division attorney Sandra Bonfiglio, P.A. We are eager to assist you with your case.



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