Your retirement savings accounts might just be the most valuable asset you own and could even be as valuable as your family home. Indiana divides retirement accounts during divorce, but there are some important considerations. Your Indiana divorce attorney can guide you through the division of retirement assets in divorce.
Retirement accounts are part of the marital estate
Indiana uses a “one pot” rule when it comes to marital assets. In most cases, this rule includes all the property owned by both spouses either prior to marriage or during the marriage. This includes property such as:
- 401k
- Traditional or Roth IRA
- Pensions
- 403b
- Government or Military pensions
Inclusion of the property in the marital estate does not imply that it will be split equally. The court assumes the equality is appropriate but may divide the property differently depending on the specifics of the case.
Factors that can affect division
Several factors can affect how a retirement account is split during the dissolution process in Indiana. This can range from the duration of the marriage, the financial situations of the spouses involved, and the contributions made toward the acquisition of marital assets, among others.
For instance, if one spouse had already saved a lot of money in retirement accounts before the marriage, that would be taken into account when dividing the accounts equitably.
Qualified domestic relations orders (QDROs)
Most retirement programs offered by employers, such as 401(k)s and pension plans, cannot just be split by a divorce decree. These types of retirement plans are usually handled using a QDRO. The QDRO is an additional court order that directs the retirement program administrator to transfer part of the retirement benefits to the other spouse. In cases where the QDRO is not drafted correctly, the plan administrator may not transfer the funds. Additionally, any mistake made during the process might lead to the imposition of penalties. Unlike pension plans and 401(k)s, IRAs do not need a QDRO.
Avoid costly mistakes
Retirement accounts include more than just the balance. It is also important to consider any taxes owed in the future, any penalties for withdrawing early, vesting periods, and any survivors’ rights. Failing to take such factors into account when splitting a retirement account could lead to a fair-seeming arrangement that actually has some nasty surprises down the road. It is important to understand how a particular retirement account operates before signing off on a property settlement.
Talk to an Experienced Indiana Family Law Attorney Today
Each divorce will raise its own set of financial issues, and in many cases, retirement accounts need to be examined closely by legal experts and financial planners. An Indiana family law attorney can help identify the retirement funds that need to be divided, negotiate a reasonable agreement for property division, and complete any necessary paperwork, such as a QDRO. For more information, contact Chris Arrington today.