Divorce among couples older than 50 is becoming more and more common in today’s day and age. This results in one of the most lucrative assets in a divorce being a retirement fund. So, what happens to your retirement fund when you get a divorce in California? Well, the attorneys at Newport Divorce are here to answer that question.
In the state of California, all assets that are purchased by either spouse during their marriage are considered community property. This means that any assets, regardless of who purchased it, whose name is on the title, or who contributed to it, are meant to be split evenly in a divorce. This includes any real estate, personal property, investments, and retirement funds.
During the length of your marriage, you and your spouse likely opened up a retirement account such as a 401(k), 403(b), 457 accounts, IRAs, and SEPs. Any money that you contributed to this account during your marriage is considered shared marital property in the state of California. This means that during a divorce the amount you put into those accounts is divided evenly among the two of you.
With regard to retirement accounts, you may be able to exclude any contributions you made to these accounts prior to your marriage. For example, if you opened up a retirement account and were contributing to it for 5 years before you married, then those 5 years of contributions are not considered shared marital property. Thus, you do not need to split this amount with your ex-spouse.
While it may seem like a quick and easy way to get out of paying your spouse their portion of the retirement funds, do not withdraw them. This can lead to many consequences and will end up costing you money in the long run. The court will require you to reimburse your ex-spouse the funds they earned and you may even be forced to pay taxes and penalties for taking the amount out prior to retirement.
During the divorce proceedings, you and your spouse will decide how the retirement funds will be dispersed. There are two ways you can do this.
If you and your spouse choose to pursue option one, you will need to file a Qualified Domestic Relations Order (QDRO) in order to split the fund. This allows your spouse to set up their own retirement fund and transfer their portion of the funds into it without paying taxes or incurring penalties.
Are you going through a divorce in California and looking to see what your options are for your retirement funds? Look no further! Newport Divorce Attorney at Law is here to help. We have helped countless couples through the stressful and emotional process of getting a divorce. We know how important protecting your assets are and we want to ensure you get what you are owed. Contact our office (949) 752-2727 or visit our website to schedule a free consultation.