Does divorce mean splitting your pension or retirement account?

Getting a divorce is often nerve-wracking for everyone involved. Both spouses are often uncertain about the social and financial impact of splitting up, especially if they are getting close to retirement age. Chances are good that you planned for retirement assuming that the funds would support you and your spouse in a single home, perhaps with additional income from your spouse.

Divorcing generally means dividing that retirement account or pension with your spouse. That can leave you with substantially lower assets than you had originally planned for. You may not be able to stay in the same home or retire at the same age you had previously hoped. With a little planning, however, you can minimize the impact of a divorce on your financial situation and retirement.

Florida treats retirement accounts as marital property

There are many factors that affect how the courts handle a Florida divorce, including:

  • The length of a marriage
  • Income and potential for income of both spouses
  • Medical needs of all family members, including minor children

Generally speaking, unless there is a prenuptial agreement on record that deals with retirement funds, these accounts are marital property subject to division. After all, Florida is an equitable distribution state when it comes to divorce.

Your retirement account or even employer-sponsored and funded pension could end up split between you and your ex in a divorce. Even if you were the only one who ever contributed to the account or pension, your spouse will probably receive a portion of its value in the divorce.

It matters less who earned it than when it was earned

When it comes to determining what assets are separate property and which ones are marital property, the date of acquisition is critical. Almost all assets you accumulate during marriage are marital property, equally owned by both spouses. The courts won't care that your name is on the account and your spouse never contributed any money to your retirement fund.

After all, the courts recognize the contributions of any non-working spouse to the family. Not only do stay-at-home spouses and parents forego income by caring for the family and kids, they also miss out on accruing any kind of pension or Social Security benefits for the entire time they aren't performing paid work.

The courts can handle pensions and accounts in a number of ways

Whether you have a 401K, Roth IRA or employer-sponsored pension, the courts have more than one way to handle the division of this critical asset in a Florida divorce. They may order that your spouse will receive a portion of each pension payment in the future to ensure regular income during the retirement years. This can be difficult and creates a tax liability that must also be considered during asset division. In some cases, this form of division may overlap with spousal support requirements.

Other times, it's possible for the courts to award the full pension or retirement account to one spouse in lieu of other valuable considerations. Major other assets, like home equity or a valuable work of art, could offset the value of the pension or retirement account. Your age, the complexity of the account in question and the length of your marriage could all factor into the final outcome of the asset division process.

Don't leave your retirement to fate. Learn about your options, and take steps to protect your financial future.

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Amy L. Beauchaine, Attorney at Law
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