If you and your spouse have decided to end your marriage, you will soon face the property division phase of your divorce.
Your retirement accounts will be among the most important assets and there are procedures to follow to ensure the division of these assets occurs properly.
Florida is an equitable distribution state meaning that the division of property will be as fair to both parties as possible. Before division can take place, each asset, including a retirement account, must have a value according to state law. The valuation date is the point at which a dollar amount is assigned to the account.
Once the court issues a final divorce decree that includes the division of retirement accounts, a Qualified Domestic Relations Order or QDRO comes into play and will apply to the majority. A QDRO is a court order that directs an administrator to divide a retirement asset into two accounts. The QDRO only applies to IRS tax-qualified plans covered under the Employee Retirement Income Security Act (ERISA). Examples of such plans are an IRA or a 401(k).
A Roth IRA
Dividing a Roth IRA does not require a QDRO. However, the split must occur through a court order. It is important for your divorce decree to specify dividing the IRA. The custodian of this account, usually a bank or financial services company, will need a copy of the divorce decree in order to generate the split.
Two types of accounts
Retirement accounts come in two forms: the defined contribution plan or savings plan and the defined benefit plan or pension. Your attorney can help you understand more about your retirement accounts and how splitting should occur during the property division phase of your divorce.