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Many Connecticut residents have significant assets that include retirement accounts and similar financial assets. The older a person is, the more valuable their retirement assets often become, and those assets often provide retirement income for spousal and family support. When a marriage ends in divorce, it is important to ensure a fair distribution of retirement assets.
Different retirement assets complicate matters
A qualified domestic relations order (QDRO) takes care of the distribution of retirement assets during a divorce. A spouse can lay claim to some or all of the value of a 401(k) account, and annuities and other retirement assets have different rules and provisions for handling distributions during a divorce proceeding. Some retirement assets are impacted greatly by taxes over time while others might remain more stable and grow.
Common solutions for settling retirement assets
The number and types of accounts could make it more difficult to reach an amicable split. Most divorce attorneys advise reaching a friendly settlement whenever possible. Pension assets generally are considered to be jointly owned, but a 401(k) might remain in whole with one spouse while another account of similar value goes to the other spouse. Dividing the 401(k) is an option, too, but it can complicate matters when trying to determine its value several years from the time of the divorce.
IRA rollover can help
Sometimes, the best solution is to either liquidate a contested 401(k) account or roll it over into an IRA. Liquidating the account could incur penalties and taxes that greatly reduce its value. A more equitable solution would be to roll it over into an IRA to avoid penalties and taxes. That option, though, only is available when the spouse holding the account either has left that employer or is over 59.5 years of age.
No matter the types of assets to be divided, getting legal help throughout the process is recommended. An experienced divorce attorney can explain how each type of asset can be divided and the benefits of doing so.