Retirement and pension plan advice for divorcing Virginia women
Divorce can be one of the most emotionally and financially difficult times in a person's life, which is one reason it is so important to think with your head instead of your heart when making financial decisions during your divorce. A recent study shows that the divorce rate among older Americans doubled between 1990 and 2009, with one in every four divorces involving a person over the age of 50. Basically, that means Social Security, retirement accounts and pension plans are high stakes in many divorces.
If you are a woman who is nearing 50-years of age and considering a divorce, retirement savings will be a big part of your divorce agreement. Oftentimes retirement accounts, pensions and annuities represent the vast majority of a couple's net worth and as such they need to play a big part in the divorce settlement discussions. Unfortunately, state and federal laws make it a rather complex endeavor in dividing this particular community or marital property.
That is why it is imperative you first select a divorce attorney knowledgeable in the legal and tax complexities of retirement plans and asset protection. When retirement funds or pensions are earned and saved during a marriage, these assets are usually treated as marital property. On the other hand, 401(k) accounts and other savings earned prior to the marriage are typically considered separate property and not subject to property division during a divorce. One caveat to that is that any increase in value to those savings could be considered marital property in some states.
Another complicating factor to consider when dividing retirement savings is that federal law governs the division of 401(k) savings and state laws generally govern how IRAs are divided, thus you need an attorney knowledgeable in these areas of the law. The division of a 401(k) account and some pension plans require what is called a Qualified Domestic Relations Order, or QDRO, which must be presented to the pension plan well before the divorce is finalized.
Any delay in presenting a QDRO to a pension plan until after the divorce is finalized can be a disaster waiting to happen. Clearly there is much to consider in the division of marital property when an older, high net-worth couple divorces, and depending on the financial situation in the marriage, much is at stake. Thus, your choice of a divorce attorney will make a difference in the final divorce settlement.
Source: Forbes, "How Divorcing Women Should Handle Retirement Accounts and Pension Plans," Jeff Landers, June 13, 2012