Errors to avoid when dividing a retirement account

For some couples in California, a retirement account could be their largest asset. Therefore, dividing the account in a divorce could be quite contentious. In a 2016 survey, the American Academy of Matrimonial Lawyers found that separating retirement accounts was the second most common cause of conflict in a divorce.

Couples dividing a retirement account must take steps to avoid taxes, penalties and unfair distribution. One common error is to write out the amounts in dollars instead of percentages in the divorce agreement. This fails to account for the possibility that the value of the account might fluctuate. A person who expects to receive a distribution from the retirement account should wait until after the divorce to agree to being removed as a beneficiary on the account. Otherwise, if the account holder dies before the divorce is final, the spouse may receive nothing.

To divide a 401(k) or pension plan without paying a penalty or tax, the couple will need a qualified domestic relations order. This is a court order that has to be approved by the plan administrator. With an IRA, a QDRO is not necessary, but the distribution has to be rolled over into another IRA. A 401(k) distribution can be rolled into an IRA or taken as a direct distribution.

In California, dividing marital property can mean separating most or all assets and debts acquired since marriage. However, this does not necessarily mean that the couple must divide everything 50/50. They may be able to work out an arrangement where they trade different assets that have roughly equal value. Legal counsel could help during this process.

No Comments

Leave a comment
Comment Information

Gavin & Dersch Law and Mediation

Vista Office
630 Alta Vista Drive, Suite 210
Vista, CA 92084

Phone: 760-691-1763
Fax: 760-941-4425
Vista Law Office Map

Del Mar Office
12636 High Bluff Drive, Suite 400
San Diego, CA 92130

Phone: 760-691-1763
Fax: 760-941-4425
Map & Directions

Schedule Consultation

Contact our attorneys today

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy