Divorce threats to retirement assets

People who live in Ohio should learn how to avoid losing more than necessary from their retirement accounts when they get divorced.

Spouses in Cincinnati, Ohio who may be starting off 2015 by making the choice to get divorced must struggle with a wide range of issues. The emotional impact of the divorce process cannot be understated as this experience can touch every part of a person's life.

From a financial perspective, the delineation of what is separate property and what is marital property can make a big impact on the final property division settlement. It is more and more common today that retirement accounts are part of the marital property and therefore the values of these accounts are split between the husband and the wife regardless of who is the named account holder.

What threat exists when a retirement account is split?

Certainly losing some portion of your savings to a former spouse does not feel good to anyone but that is not the only threat that exists. If the process of disbursing money to either spouse can be viewed in any way as an attempt to collect these funds before retirement age is legally achieved, excessive penalties and taxes can be assessed. This results in the complete loss of a large part of the savings and can be avoided.

Because more and more people over 50 are getting divorced in our country as noted by the National Center for Family and Marriage Research, this issue is of direct concern to a great number of divorcing couples. Even those people at earlier ages will want to protect against unnecessary losses.

What should couples do to avoid these losses?

One of the first things that should be done is to ensure the right legal documentation is filed when splitting retirement accounts. The Tampa Bay Times and Fox Business both indicate that this should involve what is called the Qualified Domestic Relations Order or the QDRO for short.

Some financial transactions require the filing of a QDRO but others do not. Even when not legally required, however, a QDRO can be filed and is often a wise choice. This document essentially makes it clear that a transaction is happening pursuant to a domestic relations order such as a divorce decree and can therefore guard against the tax or penalty assessment.

Another important thing for people to know is that all disbursed money should be reinvested into a new and qualifying retirement account. Forbes provided details on a situation in California where a wife received funds from her ex-husband's retirement fund and did not do this. Instead of coming out money ahead, she was ordered to pay large tax sums.

How to get help

Talking to a family law attorney at the outset of a divorce in Ohio is a must. Getting the right help can be a good step toward saving retirement assets.

Keywords: divorce, retirement, assets