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How Will My Retirement Accounts be Divided in My Divorce?

How will my retirement accounts be divided in my Florida divorce?

How Will My Retirement Accounts be Divided in My Divorce?

One element of divorce in the state of Florida is the process of dividing property that was accumulated by both spouses during their marriage. That includes cars, clothes, house, and the various personal property that are to be divided between the parties. Some of the largest assets for couples during the process of divorce are retirement benefits and funds. A large ticket item that accumulates during the length of the marriage. Let’s review how retirement accounts are divided in the process of a divorce in Florida.

Retirement Plans Division in a Divorce

Typically, pensions and retirement accounts are separated between the parties as a part of the divorce. The court will sort the allocation based on a number of elements. Florida is what is branded as an “equitable distribution” state. There are people who mistakenly think that this means all that is owned by the parties will be divided 50/50 during the divorce in each case. However, that is not always true as courts are obligated to make a fair and just partition of the marital assets, which is not necessarily an equal split.

It is so important to remember that the whole value of a particular pension or retirement plan isn’t always measured as marital property and is subject to division. As an alternative, only the quantity of the plan that increased in value during the course the marriage is subject to division. Florida courts use a variety of methods to produce the sum of a pension or retirement plan that was made during the marriage, and that is subject to be divided.

Elements used by the Florida courts to determine how to distribute the marital assets – include retirement pension plans and benefits – include:

  • The length of time you were married
  • The general financial conditions of each spouse
  • Both spouse’s contributions, together with contributions to the progress of non-marital or marital assets
  • Both spouse’s liabilities and debts

Separation of the retirement benefits also needs the groundwork of a Qualified Domestic Relations Order (QDRO). This order states that an ex’s legal right to obtain a percentage of an eligible retirement plan’s benefits payments or balance and asks that the retirement plan’s administrator make payments accordingly. There are substantial tax penalties if a QDRO is prepared incorrectly or isn’t prepared at all.

Traditional Retirement Accounts

Traditional retirement accounts like IRAs, 401ks, Roth IRA plans, annuities, and other similar accounts can be opened by an individual, but usually people own these retirement account types as a result of being employed. These accounts are usually considered marital assets and are subject to equitable split unless the account is listed in the name of the spouse who accumulated and earned monies on the account before becoming married. The accounts will be split along with all other marital property centered on the causes listed above, even if one of the spouses didn’t work at all.

Defined-Contribution vs. Benefit Plan

There are two general retirement account types: defined-contribution plans and defined benefits plans. Comprehending the difference among the two can help exes have a better understanding on which benefits they are entitled to. At times, a defined benefits plan is also titled a pension. A pension assures the account owner a precise amount of money at the time of retirement. The exact amount of money can be paid by one lump sum or on a periodic base. In a defined benefits plan, the account owner’s employer typically bears the entire cost of this kind of plan.

Alternatively, a defined-contribution plan doesn’t pay a particular benefits amount at the time of retirement but instead lets a person save money for their retirement time in a tax-deferred account. 401k accounts are a good example of a defined-contribution plan. In time, the account owner (and at times the employer) will make contributions to the plan. Upon retirement, the account owner typically removes money from the account to cover living expenses.

Division of Traditional Retirement Accounts

Whether a particular account is a defined-contribution plan or a defined-benefit plan will play a role in how that plan’s profits are split during a divorce. In a case of a defined-benefit plan, the ex-spouse might be able to choose to get a lump sum payment. For example, the ex-spouse could receive a specific amount or a percentage of the present worth of that account at the stage of divorce. Some individuals spend it while others choose to reinvest it. On the other hand, the ex-spouse might wish to collect payments at retirement.

For defined-contribution plans, usually the account’s balance is multiplied by a portion of vesting. This is then split between the spouses.

Government Pensions

Government pension divisions in the State of Florida can be tricky during a divorce. The reason being that government pension plans are freed from the ERISA (Employee Retirement Income Security Act), which is the law that forms QDROs. Therefore, government pension plan managers are not mandated to receive QDROs, and plan administrators are not required to make benefits payment to the ex-spouse/non-employee.

County and state workers in the State of Florida are protected by the Florida Retirement System that voluntarily takes QDROs. Cities, however, can choose to either reject or accept QDROs. So, in cases like that where a municipal retirement plan doesn’t allow QDROs (note that most municipalities in Florida don’t), the spouse who is the non-employee might want to think about having their spouse’s municipal pension appraised and then take a different asset of equivalent worth. Otherwise, the spouses might have to get crafty in the drafting of court instructions in order to make sure that the non-employee spouse has the right to use to the benefit that he/she is entitled to.

Military Retirement Benefits

If your former spouse was in the military and receives or is entitled to receive military retired pay, then you have the right to receive part of the benefits in a divorce. The Uniform Services Former Spouse Protection Act permits state courts to contemplate a service member’s military retired wage to be considered a marital asset in a divorce. Keep in mind that courts follow specific principles when allotting military retired pay benefits during a divorce.

Totaling military retired pay benefits during a divorce can get very complicated, which obligates spouses to reflect on various factors and possible problems. Like other facets of property division during a divorce, which is best handled by a knowledgeable family law attorney.

Consult with an Experienced Family Law Attorney

The way in which retirement benefits are allocated as part of a Florida divorce can become somewhat complicated. Precise steps need to be followed to make sure there is an equitable split of all resources, and that inadvertent tax penalties are avoided. That is the reason that so many people elect to hire a qualified divorce lawyer to help them determine which benefits they are eligible for and safeguarding those interests in the divorce order.