As Pennsylvania residents who follow social trends know, the American divorce rate for older couples has jumped from mere 2 percent of divorced individuals 50 and over in 1960 to between 11 and 15 percent in 2010. This age-specific evolution changes the asset dynamics of a divorce. Retirement accounts are an increasingly important part of asset division. In one study, almost one-third of divorcing adults were unaware they could claim part of their spouse’s retirement account and did not do so.
Retirement accounts, in equitable distribution states such as Pennsylvania, may be part of the divorce settlement. In these states, assets in the name of one or both parties are considered marital property if they were acquired during the marriage. If acquired before the marriage, the status may be different. The tax aspects of retirement funds when they are transferred from one spouse to another is addressed with a formal document called the Qualified Domestic Relations Order.
Some tips include using a financial professional to determine what to do in connection with a property division determination. This includes Social Security benefits and selling a home that is valuable when the divorce occurs rather than spending money on maintenance work to sell it at an unknown price in the future. An ex-spouse may withdraw money from a transferred retirement account and roll it over into an individual retirement account without penalty pursuant to a QDRO.
Retirement accounts make up an important part of asset division particularly in a divorce between older individuals. An attorney with experience in family law matters can assist a divorcing client in reviewing assets so the decisions they make during divorce negotiations result in financial security as they move forward.
Source: Forbes, “The Big Money Mistake Divorcing Women Make“, Kerry Hannon, July 03, 2014