You may be aware that your spouse is entitled to half of your stuff in divorce, but that’s not strictly true. Instead, the spouse is entitled to half of the marital estate during divorce. Any asset or debt that was procured during the marriage is considered a part of the marital estate. Assets that were procured before the marriage are considered the separate property of one spouse. For that reason, any value that a retirement account accrued during the marriage is up for distribution when it comes time to divide the marital estate. So, to answer your question specifically, whatever value accrued during the marriage is considered a part of the marital estate and is, therefore, a marital asset.
Dividing retirement accounts in a Florida divorce
In the State of Florida, marital assets, including retirement accounts, are distributed through a process known as equitable distribution. In most cases, this will mean that the marital estate is divided 50/50. However, the courts can favor one party over the other when it would be “unfair” to divide the marital estate in half.
During equitable distribution, a judge might consider such factors as:
- The duration of the marriage
- The financial situation of the spouses
- Each spouse’s contributions to the marriage
- Each spouse’s debts and financial obligations
Chances are good that you had your retirement accounts in place before you married. If that’s the case, then everything you earned before the marriage took place is considered your own separate property. But then, you got married. So, all the funds that were added to the retirement accounts during the marriage are considered marital property. As a result, those accounts must be partially divided when it comes time for equitable distribution.
How do I prevent tax penalties if I have to distribute my retirement account?
If you mishandle your retirement account, you may have to deal with tax penalties. Before you raid your retirement accounts to pay for your divorce, you should consider consulting with a divorce attorney or tax professional to avoid unnecessary tax penalties.
The best way to avoid early withdrawal penalties is with a Qualified Domestic Relations Order (QDRO). A QDRO allows you to divide your retirement accounts without incurring related tax penalties. QDROs can be used to divide any retirement account except an IRA. There are other legal methods for dividing an IRA without incurring penalties.
To divide an IRA, the court will issue a transfer incident to divorce, which allows a tax-free transfer of the IRA’s assets between the spouses as part of their divorce settlement.
Talk to a Tampa, FL Divorce Lawyer Today
Do you have more questions as to whether or not your retirement accounts are considered marital or separate property? Call the Tampa family lawyers at Westchase Law, P.A. today to schedule an appointment, and we can begin addressing your concerns right away.