What Happens to Retirement Funds in a Massachusetts Divorce

Retirement funds are the foundation of people’s future financial security. They provide reassurance to spouses, particularly in long-term marriages. But a divorce decreases reassurance in a lot of aspects, including access to retirement accounts once the two spouses are no longer employed.

Plenty of people consult with a divorce attorney to learn more about their options when they get a divorce. A lot of assets can be easily evaluated and divided, but this may not be the case in terms of retirement funds. If you are planning to get a divorce, understanding what happens to your retirement accounts is essential:

The Basics of Property Division

Usually, parties decide on how to divide property by themselves. The majority of efforts in divorce concentrate on child custody and support matters, making the property issue almost secondary.
After all issues about kids usually take up much emotional capital compared to the assets you can get.

However, this can be a serious issue if the divorce involves bigger assets like homes, rental property, businesses, high-end vehicles, or valuable items. In such cases, a divorcing couple may decide to liquidate their assets and divide the proceeds between them. Also, the couple can choose to follow the give-and-take route. For instance, they could agree that one spouse gets custody of the child and keeps the family house while the other gets the rental property or vacation home. While these assets are easily assessed for a specific dollar amount, retirement funds can be a different story.

The Problem with Retirement Funds

Even if retirement assets have been accumulated before marriage, parts of it may be considered marital assets. Unless the marriage only lasted for a short time, the retirement account will be subject to division in a divorce.

Retirement funds are split in a Qualified Domestic Relations Order (QDRO). A lot of pension plans won’t pay out to a beneficiary following a divorce with a QDRO. A QDRO is a document that recognizes the eligibility of a spouse to get a portion of their spouse’s retirement accounts. This can benefit both parties. The pension owner is aware of its assessed value and the amount to be paid out. Spouses who get the funds are assured of their security and the amount.

The problem lies in plan valuation. Valuating 401k plans is easy since the value is the account balance. Usually, pension plans involve a CEO or actuary to assign a specific value. To determine the value, the number of projected payments is taken from the pension with actuarial tables. Such payments give a total, which will be the asset’s value.

If you are like other people, you may be worried about tax matters that can arise when retirement accounts are divided. In a divorce, a retirement account can be split without incurring penalties, taxes, and interests.

Why Seek Professional Guidance

Retirement accounts in a Massachusetts divorce involve professional guidance. You must work with a financial expert who can determine the value of your retirement accounts and an attorney to advocate for your interests. This area of the law is something you cannot deal with alone.

Retirement accounts have various division rules and requirements. Neglecting your plan’s specific requirements can result in an unfunded retirement. Miscalculating paperwork timing or not thinking about the tax implications of retirement asset division can jeopardize your financial future. Your divorce attorney can help ensure this won’t happen.

When pursuing a Massachusetts divorce, you must understand the laws that govern property division and how such laws may affect your pension funds and retirement. By hiring a competent divorce attorney, you can improve the odds of getting a favorable outcome in your divorce that protects your interests.