Individuals in Pennsylvania who are divorcing will need to negotiate the division of assets, and this includes retirement accounts. How these accounts are divided and distributed depends in part upon what kind of accounts they are. For example, individuals will need to be able to transfer the funds without incurring tax penalties. For 401(k)s and employer-sponsored plans, this requires a Qualified Domestic Relations Order. For individual retirement accounts, a transfer incident is necessary.
State laws differ regarding how the accounts are divided, but in Pennsylvania, factors such as the income of each individual is taken into consideration rather than simply splitting the accounts 50/50. A prenuptial agreement may affect how accounts are divided. People can also choose how they want the funds distributed. For example, they can take their share in cash, wait until the owner retires to begin taking distributions or roll the accounts into their own immediately. People must remember to change the beneficiary on their retirement accounts as well to remove the ex-spouse.
Another consideration in division and distribution is whether there will be tax penalties. Individuals should understand these options before making a decision. Couples may also find that they are both in a better position if they are able to negotiate how they divide accounts rather than turning to litigation.
In a high-asset divorce, retirement accounts may be among a number of assets individuals need to divide. Real estate, collectibles such as art and other types of investments might all need to be divided. People may wish to consult an attorney to ensure that their interests are protected. In some cases, they may be unaware of all their rights while in other cases, due to the emotions surrounding divorce, they may sometimes relinquish their claims on assets and later come to regret it.