divorce and retirement

Florida is an Equitable Distribution State

Florida, like a number of other states, uses principles of “equitable distribution” when it comes to dividing a couple’s marital property in connection with a divorce. This does not mean that a Florida court divides property on a 50/50 basis. It means instead that the court considers a number of factors in order to come to a fair distribution. Those factors include:

  •  The parties’ prior standard of living
  •  The length of the marriage
  •  Age and physical and emotional condition of both spouses
  •  Each spouse’s financial resources and the income-producing capacity of the assets each receives as part of the distribution
  •  Time required to acquire sufficient education or training to find appropriate employment
  •  The services that the spouse rendered in homemaking, child-rearing, and the education and career-building of the other spouse

Retirement Benefits: Are They Subject to Equitable Distribution?

Typical Types of Retirement Accounts

Traditional retirement benefits can take a number of different forms, including:

  •  Defined Contribution Plans (usually in the form of a pension) earned by some employee working for some corporate employers
  •  Defined Benefit Plans (usually in the form of employer profit-sharing plans) that are earned by some employees working for qualified employers
  •  401(k) plans that are typically maintained by employers for their employees
  •  IRA and Roth IRA accounts that are maintained individually by one or both spouses
  •  Some annuities, employee stock option plans, and other similar accounts

Typically, Retirement Accounts Are Marital Property

Generally speaking, the retirement accounts of both spouses are considered marital property and, therefore, are subject to equitable distribution. One should bear in mind, however, that the entire value of a particular retirement plan, account, or pension of a spouse is not necessarily considered marital property. Instead, only the portion of the plan or account that was earned or built up during the course of the marriage is ordinarily subject to division.

Qualified Domestic Relations Order

The division of retirement accounts is accomplished with a special court-approved document, known as a qualified domestic relations order (“QDRO”). The court order sets forth the marital property rights of the former spouse of a plan participant. Since retirement benefits are usually paid only at some time in the future, the QDRO essentially serves as an instruction sheet to the retirement plan administrator, detailing what interest that the former spouse has in the participant’s retirement assets.

Note that, if no QDRO is entered at the time of the divorce, any distribution from the retirement plan will be taxed to the plan participant and, unless he or she is over the age of 59 and one-half years, a 10 percent penalty will be applicable. If a QDRO is entered, those funds generally won’t be taxable to the participant in the plan.

Moreover, the party receiving funds will not be taxed or penalized, as long as the distributed funds are rolled over into a qualified IRA within 60 days of receipt. In most cases, if the former spouse elects to receive cash, instead of rolling the entire distribution into an IRA, the former spouse is liable for federal taxes, but would not usually be subject to the 10 percent early withdrawal penalty.

Is a Divorce in Your Future?

Are you facing a divorce, separation, or other family law issue? Do you have retirement interests that need to be considered within an overall equitable distribution of property? At Beller & Bustamante, P.L., we have the knowledge and experience not only to represent your interests vigorously when it comes to a divorce, but also to advise as to the appropriate equitable distribution issues related to your retirement account or accounts. We have years of experience and will aggressively handle your case.  Contact us online or call us at (904) 288-4414 today.