On behalf of Kelly Law Office, LLC posted in high-asset divorce on Tuesday, December 10, 2019.
When Ohio residents divorce, the question of how to divide a retirement account may be difficult to answer. This is because it may represent one of the most valuable assets that an individual could have. Retirement plans may also be tricky to divide because of the potential tax implications of doing so. As defined benefit plans are not considered marital property, any appreciation that takes place before marriage or after a divorce cannot be split.
However, retirement plans such as a 401(k) are typically considered marital property. Therefore, spouses may be entitled to a share of it even if it is in one spouse’s name only. Money inside of a 401(k) or other qualified plan is divided per the terms of a qualified domestic relations order (QDRO). There is no need to split assets in an IRA using a QDRO, but they can be split per the terms of a divorce decree.
In most cases, money from a 401(k) is transferred either directly to the other spouse or to an IRA in that spouse’s name. If money is rolled directly into an IRA, the recipient generally doesn’t have to pay any income tax or early withdrawal penalties. Those who are at least 59 1/2 at the time of their divorce may be entitled to the money without owing any penalties.
Those who are choosing to end their marriage might want to discuss the process of doing so with legal professionals. This may make it easier to determine how to split a retirement account or other assets acquired during the marriage. In some cases, it might be possible to settle a divorce with the help of a professional mediator. However, if necessary, legal counsel may represent an individual during a formal divorce trial.