Divorce can create a lot of questions about finances, including your retirement savings. If you spent years working hard to build up your nest egg, you want to protect as much of it as possible.
Understanding your options can help you keep your future secure.
Knowing what constitutes marital property
Retirement accounts like 401(k)s, IRAs, and pensions generally fall under the category of marital property. This means that the court can divide them during a divorce. Keep in mind that Arkansas follows “equitable distribution” laws. That means that the court divides property fairly but not necessarily equally.
On the other hand, any retirement savings you had before the marriage usually count as separate property and are not subject to division. Proving how much of your retirement savings fall into each category plays a significant role in the court’s decision.
Gather detailed financial records, including statements from before and during your marriage. This documentation can help prove which part of your retirement is separate.
Checking your options for dividing retirement accounts
You have several ways to divide retirement accounts in a divorce. Some couples agree to split retirement accounts down the middle, while others trade assets to keep their retirement intact. For example, one spouse might give up their share of the house in exchange for keeping their full retirement savings.
If you need to divide a retirement account, a Qualified Domestic Relations Order (QDRO) is often necessary. This order tells the retirement plan how to distribute the funds. Avoid unnecessary taxes and penalties by making sure to draft the QDRO correctly.
Be aware that benefits from some organizations have special rules. For example, active duty service members, veterans, and railroad workers have unique guidelines. Check how these affect a split of your assets.
Protecting your accounts during a divorce isn’t just about the present. It’s also about planning for your future. Consider how dividing your retirement savings impacts your long-term goals and devise a strategy that keeps you financially on track.