On behalf of The Law Office of Gustavo E. Frances, P.A.
When a marriage comes to an end, many Florida residents turn their attention to dividing their retirement savings. Aside from child custody matters, property division is the most impactful aspect of most divorce cases. Retirement savings can be a critical component within the property division process. Understanding how to properly divide retirement savings can help make this process far easier to navigate.
For spouses who have qualified plans, the transfer of assets will require the use of a special document known as a Qualified Domestic Relations Order (QDRO). The person who receives retirement savings from a qualified plan is entitled to invest those assets into their own plan, or into an IRA. It is important to designate that the savings are being transferred due to divorce so that taxes and penalties can be avoided.
When it comes to an IRA, the transfer of assets from one spouse to another must be completed within a year of the time of divorce. Otherwise, an automatic IRS audit will result. It is also important to designate the transfer as an “incident to divorce,” so that neither party is subject to an early withdrawal penalty.
For many Florida couples, determining how to fairly divide retirement savings is the easy part of the property division portion of the divorce. Understanding how to accomplish the transfer of those assets can be far more challenging. It is important to understand the proper procedure for moving retirement assets from one account to another so that neither spouse is hit with excessive taxes, fees, or penalties.
When you need a family lawyer in Fort Lauderdale, FL, you can contact us by click here or calling at 954-533-2756 for a free consultation.
Forbes, “Divorcing? How to Split Up Retirement Nest Eggs“, Duncan Rolph, Nov. 23, 2016