Dividing Retirement Assets Can Be Tricky During Divorce

Many divorces involve dividing retirement assets. Dividing these assets can be tricky.

Many divorces involve dividing retirement assets. Dividing these assets can be tricky.

Most people have either 401-K or Individual Retirement Accounts. However, dividing these can also cause problems. The biggest issue often is deciding when to evaluate the asset. Some people want to use the date the parties separated, while others use the date on which one of the parties filed for divorce.

Marital assets are acquired between the date of marriage and the date on which the divorce is filed. Florida law uses both dates. The basic statute on property says the cut-off date to decide marital assets is the date of filing a divorce. However, the same statute says the date something is valued shall be based on what’s fair. Different dates can be used for different assets. That doesn’t provide much guidance for two people trying to settle the case.

Other challenges arise when there’s a pension, especially one that was started before the marriage. Marital assets are acquired between the date of marriage and the date on which the divorce is filed. If a pension is started before the marriage, the parties should determine what the monthly benefits are when the parties got married.

You also need to determine how much the monthly benefits increased during the marriage, and whether the plan is vested. Getting answers to these questions is not easy. Plan administrators can help. State employees can contact an office in Tallahassee regarding their benefits.

Another challenge involves military retirement plans.

This includes military pensions for active duty personnel, and for members of the Reserve. Active duty personnel receive their benefits immediately upon retirement. However, Reservists often do not receive benefits until they reach the age of 65. In a long term marriage, those benefits may be important. However, for a couple who have been married for seven years or less, or who are young, it may not be practical to seek part of this retirement.  

Loans against a 401-K or other plan may also raise questions. Often when there is loan against the retirement, the retirement balance increases as the loan is paid off. If the loan is being paid after the divorce is filed, I have seen litigation over whether the payments are marital. As you can see, dividing these accounts can be complex.

If you have a significant retirement, it’s best to consult both an attorney on how it should be distributed, and an accountant on any tax issues.