Divorces are trying times for almost everyone. If children are involved, then custody and visitation schedules need to be worked out, which can be an emotional endeavor for both parents. In other cases, fighting over finances can take a toll, with couples arguing over personal property, bank accounts and even homes. One thing that requires special attention and a careful approach involves the division of retirement accounts. If sufficient care is not given to the matter then serious mistakes can occur, costing not only time, but serious money.
The first thing to understand when dealing with the division of retirement funds is that timing is extremely important. Laws regarding dividing retirement accounts are clear that a narrow window exists where the funds can be separated without incurring taxes and penalties. If couples wait too long to file the necessary paperwork you might end up shaving thousands of dollars off your expected share of retirement funds, a serious financial hit that could take time to recover from.
Second, how accounts are divided also matters. Simply calling your account administrator and requesting funds be split between yourself and your spouse could lead to substantial fees and penalties. Instead, a document known as a Qualified Domestic Relations Order (QDRO) must be prepared, approved, filed, and submitted. The QDRO specifies how the funds should be divided and ensures that the division occurs without incurring expensive fees. Your South Carolina family law attorney will understand which accounts require a QDRO be used.
A final tip for those facing the division of retirement accounts is to address what happens to any increases or decreases that may occur between the time of the agreement and date the amounts are actually transferred. Sometimes, it makes sense to use a percentage instead of a dollar amount, because naming specific dollar figures can sometimes lead to an unexpected division if not handles properly, whereas using a percentage helps ensure that neither party unfairly benefits in the split.
Source: “Caution urged when splitting retirement funds in a divorce,” published atDigitalJournal.com.