How are Retirement Accounts Divided in a Florida Divorce?
Outside of the primary home, one of the largest assets for any couple is a retirement account. How retirement accounts are divided in a Florida divorce is often one of the most significant issues for spouses splitting up, and it can have a substantial impact on the overall divorce settlement. At the law office of Blair H. Chan, III in Tampa Bay our office is here to help you navigate the often complex process of dividing retirement accounts in a Florida divorce. Call the office or contact us today to schedule a free consultation and learn more about how retirement accounts may be split in your case.
What If Only One Spouse Contributes?
One common misconception is that if only one spouse contributes to a retirement account it can be considered separate property. If a retirement account receives contributions during the marriage the account is seen as marital property. This is true even if only one spouse contributes to the account because the court sees the other spouse as contributing to the marriage in other ways. The only funds in a retirement account that may be considered separate are contributions made prior to the wedding.
What Retirement Accounts Require a QDRO?
The complexity involved in dividing retirement accounts during a divorce is usually dependent on the type of retirement accounts in question. All retirement accounts that fall under ERISA rules, such as 401(k) and 403(b) accounts, necessitate that a qualified domestic relations order be filed when the final divorce agreement is submitted to the court. A QDRO authorizes these types of retirement accounts to distribute, in part or in full, funds to someone that is not the account holder.
Other types of retirement accounts like an individual retirement account (IRA), military retirement account, and thrift savings plans do not require a qualified domestic relations order. However, you must still contemplate the potential tax implications of dividing these types of retirement accounts and how it may affect the ultimate distribution of funds.
Tax Considerations for Retirement Accounts
If a retirement account requires a QDRO, the money in those accounts can be transferred to a former spouse with no tax penalties on the fund. However, this applies only to the division of funds in a retirement account. If one spouse chooses to make a distribution early on a QDRO account some penalties may apply. For retirement accounts not covered by a QDRO, in certain limited circumstances a spouse may be able to make a one-time distribution of retirement funds related to a divorce without being subject to an IRS tax penalty of ten percent. Other divisions and distributions from retirement funds may be subject to tax penalties when splitting retirement accounts in a divorce.
Let Us Help You Today
To learn more about how the retirement accounts may be divided in your Florida divorce case, contact the Tampa divorce lawyers at the law office of Blair H. Chan, III to schedule a free case evaluation.