Divorce doesn’t just affect a person’s finances—it can also affect the retirement savings they have built up over the years. A divorce may divide a person’s retirement accounts based on two main factors: when the money was put in and where that money came from.
Preparing to divide retirement assets
Arkansas courts generally divide marital property equally, but fairly. This means the court considers the circumstances of both spouses and aims to divide the property in a way that is fair to each person. Spouses should carefully review their retirement accounts before agreeing to divide property. Important steps include:
- Identifying all retirement accounts: Find all retirement funds such as the 401k plans, IRAs and employer pensions.
- Determining which assets are marital: A retirement account may have both marital and separate funds. Benefits or contributions earned during the marriage may be subject to division. Assets from before the marriage may remain separate. Detailed records can help show which part of an account is marital and which part is separate.
- Understanding how spouses will divide retirement accounts: Retirement accounts may require specific procedures to transfer a spouse’s share. The requirements can vary depending on the type of retirement account, and spouses should also consider any tax liabilities.
Spouses should review the retirement plan’s rules and avoid withdrawing or moving funds before the court finalizes the divorce order. Doing so could create tax issues or affect how the assets are divided during the divorce.
Why protecting retirement assets matters
The way a court classifies retirement accounts can affect each spouse’s finances after divorce. The way the spouses divide those accounts can also affect their future financial security. A divorce attorney in Arkansas can help identify retirement accounts that may be subject to division. The attorney can also explain the steps for dividing those accounts before the spouses finalize the divorce.