Long, Murphy & Zung, P.A.

How are retirement accounts handled in a Florida divorce?

Other than your primary home, your retirement account could very well be your biggest asset. Particularly if you or your spouse are nearing retirement age, these accounts may be well-funded and represent a substantial portion of your income over the course of many years. If you are thinking about divorcing, you may worry about the potential impact on your retirement.

That concern is completely justified. After all, unless you have a prenuptial agreement in place, any assets acquired during your marriage could end up divided during the divorce. In general, when couples plan for retirement funds, the amount they expect to live on includes the expenses related to maintaining a single residence, potentially one that is either paid off or nearly paid in full. Splitting the accounts in a divorce can have a profound impact on how ready you are for retirement.

Most retirement accounts are marital assets

Even if only one spouse contributed to the retirement account, the contents are generally marital property. If the account existed before the marriage, the courts may exclude deposits made prior to marriage from the division process. Any amount deposited after the marriage, however, will likely get split by the courts. Regardless of who was earning more or whose name is on the account, both spouses will probably receive an equitable share of the funds.

The primary wage earner may have been the one making deposits, but the unpaid work and extra income created by the other spouse can have a direct impact on your ability to save money for retirement. The funds deposited came from income during the marriage, which means that the money in the account is a marital asset. Both spouses, regardless of contributions to or ownership of the account own the funds inside it.

Divorce allows you to split the fund without penalties

The good news about all of this is that if you request that your retirement account get divided due to a divorce decree and court order, there are no tax penalties associated with the division of your retirement account. The manager of your retirement fund can quickly process a Qualified Domestic Relations Order (QDRO), making a deposit of the allocated funds into the other spouse's new account.

In some cases, instead of splitting the retirement account, the value of the account can be subtracted from one spouse's assets received in the divorce. Depending on your situation, that may be a better option. However you move forward with these funds, it's important to prioritize replacing what you lost after your divorce. In order to retire as planned and sustain a similar quality of life, you may need to save significantly more than you had been to build your retirement fund back up.

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