Jamie Graham & Associates, PLLC

Be sure to consider retirement accounts in a divorce

Dealing with finances is often a complicated issue among married couples in Texas or elsewhere around the country. The issues surrounding money can become even more complex when a couple decides to get a divorce. Couples need to deal with the division of property, which can be an emotional process as well.

Financial advisors recommend that individuals get a thorough understanding of all income and expenses. Another crucial element is to determine what items are separate or community property. This can be particularly difficult when retirement accounts are involved. Accounts such as 401(k) plans, Roth or traditional individual retirement accounts or other plans all have different regulations about withdrawals, taxes and penalties. In addition, the plans may have specific rules about how the distribution can be divided.

In a divorce situation, a qualified domestic relations order, or QDRO, is an important document to obtain. This is a court order which states that one spouse is entitled to a part of a retirement plan and allows for the plan to be divided without incurring penalties or taxes . Also, it is critical to remember to change the beneficiary designations on any financial accounts or documents. The failure to do this could cause problems in the future since the beneficiary documents would typically override what the divorce decree states.

It is also advantageous to figure out what life will look like after a divorce is final. Most people will be living on less income than when married, so they need to make adjustments accordingly. An individual may also have to start making plans to save for the future and rebuild accounts.

When Texas couples are going through divorce, it is wise to seek professional help. An experienced divorce lawyer can offer guidance through every step of the complex process. A knowledgeable attorney will work for clients to seek a favorable outcome in the proceedings.

Source: marketwatch.com, "Money Milestones: A divorce doesn't have to be the end of your retirement funds", Alessandra Malito, Oct. 9, 2017

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