What Happens to Your Retirement Account During a Florida Divorce?

You’ve made the tough decision to end a Florida marriage. Now comes another harsh reality.  You might not be in as good a financial standing as when you were married.

Consider the assets you’ve accumulated during the marriage – a house, property, boats, cars, jewelry, clothes, a bank account or two.  All assets are expected to be divided between the spouses, if they were accumulated during the marriage.  

Florida is an equitable distribution state. That means in a divorce the assets will be divided based on a fair and equitable division of the property.  That does not necessarily mean 50/50.

The court will look at the contributions each partner made to the marriage, some of which may not be financial, but substantially contributed to the family.  For example, the value of childcare will be considered a substantial contribution to the marriage.  

Another asset that may be overlooked in a Florida divorce are any retirement funds that may have grown in value during the marriage. These funds can actually hold the opportunity for a secure retirement and should never be overlooked. 

Dividing Retirement Plans

A retirement plan, or a pension plan connected to one’s work may be one of the most valuable long-term assets that survives a marriage. 

It may sound counter intuitive, but the value of an individual retirement account (IRA), or a 401K plan can be divided. Even though it is opened by one of the marriage partners and may be funded via that person’s employer, it is still considered marital property if it was accumulated during the marriage.

The exception may be argued when these assets were established and funded prior to the marriage. If there were no deposits made into the account during the marriage, it could be argued to be a separate asset but that is generally not the case as these funds are intended to grow over time.

Any contributions during the marriage period then would be subject to equitable distribution.

Now how to divide it? 

For certain types of retirement plans, the court orders a Qualified Domestic Relations Order, or QDRO, to direct a retirement plan’s administrator on how to divide the assets to pay the other spouse child support, alimony, or marital property in a Florida divorce. This assures the legal right for one ex-spouse to receive a portion of the qualifying retirement plan. 

Factors to Consider when Dividing a Florida Retirement Plan

A number of factors are taken into consideration when divorce presents the need to divide a retirement plan. Among them:

• How long did the marriage last?
• How much did each partner contribute to the fund?
• When was the fund established?
• How much did each partner contribute in non-financial assets to the marriage?
• How much debt does each partner have?

Types of Retirement Plans

There are two different types of retirement plans.  A defined benefit plan is where you are expected to receive a promised payout at the time of retirement. The employer has funded the entire amount.  This is also known as a pension plan.

Dividing the defined-contribution plan might result in a lump sum cash payout at the time of divorce or an option of payments in the future.

The fund might also be a 401k or a defined contribution plan, partially funded by the employer.  If it is a defined contribution plan, the divorcing spouse may be eligible to receive a portion of the plan determined by the number of years they were married and how it is expected to grow.

QDRO’s are not used to divide an IRA, but they are used to divide a company plan.

Dividing IRA funds can be accomplished with a direct transfer to another’s IRA account, avoiding tax liability. Make sure there is a divorce decree that addresses division of the IRA, otherwise you will trigger a tax on the transfer.

Contact an Experienced Florida Divorce Attorney

This time is when it’s crucial to have an experienced Florida family law attorney by your side. You do not want to experience any surprises that you did not anticipate.

Spencer Law, P.A. offers you the sound advice you need during this time to leave nothing up to chance. Our offices are located in Pensacola, Sandestin, and Fort Walton Beach for your convenience. Begin the conversation by setting an appointment at 850-795-4910.