Keeping Retirement Secure During A Divorce
Couples in San Antonio who are facing a divorce or the dissolution of a domestic partnership have many issues to be concerned about. These can include child support, child custody, living arrangements, spousal support and property division. The division of property can be extremely complex, especially when the value of some assets is subject to fluctuation, as with retirement accounts. In this case, a business evaluation or forensic accounting must be performed.
During a divorce, the need to equitably split individual retirement accounts, pension funds and other similar assets is common. However, there are many nuances to such transactions that require great care to avoid the loss of valuable retirement dollars on the part of one or both spouses. Additionally, whether a business is valued for just the equipment value or as an ongoing business value makes a tremendous difference in the estimated worth of a business.
How To Properly Assess Ownership
One of the most important things that couples should be aware of is the importance of determining ownership not in terms of concrete dollar amounts but in terms of the percent of the fund’s value. This is the only true way to adequately protect each partner’s share of the account.
To illustrate the point, assume that you and your soon-to-be ex-partner are equally splitting up an IRA that is currently worth $200,000. You have to request documentation of what the account was valued prior to marriage, what the account is worth today and divide by two, unless there is a prenuptial agreement that lists an absolute dollar amount to be awarded to be a spouse.
If your original agreement stated that each spouse or partner was to receive $100,000 from the fund, you would have a problem. It is possible in this case that one person would still be eligible to receive the full $100,000, leaving only $50,000 for the other partner. If, however, your original agreement indicated that each person would receive half of the fund’s value, that ratio would hold true no matter how the account value fluctuated.
Leverage The Qualified Domestic Relations Order
Even though a QDRO is not required in every financial transaction during a divorce or domestic partnership dissolution, it can be used for many of them. When you utilize a QDRO even when not stipulated by law, you make absolutely sure that the IRS completely understands that the transfer being made is part of a dissolution proceeding versus a potential way that you may be trying to take an early distribution. If the latter is suspected, you may be faced with taxes or penalties or be forced to prove otherwise, which also costs you money.
In the context of a military divorce, the spouse that is to receive a percentage of the retirement benefits must have a QDRO prepared and sent to the Defense Finance and Accounting Services (DFAS) or else they will not receive their retirement check.
The Right Professional Help Makes The Difference
Because your financial future is on the line in these situations, ensuring that you work with a professional who understands the laws governing distributions of retirement accounts when you are going through a divorce or dissolution is critical. Taking the time to find an experienced attorney can save you money down the road.