Many people facing a divorce are hyper-focused on the here and now. And sometimes, it really is best to take things one day at a time.
Your divorce attorney, on the other hand, should be looking at your long-term well-being. That means figuring out a plan for division of assets, debts and benefits to sustain you not just over the next several months, but over years and even decades.
Even if a couple is not near retirement age, benefits accrued during the marriage are subject to division and must be carefully considered, just as one would weigh houses and other real estate. In fact, retirement benefits may actually be the largest asset a couple has between them.
Putting off the issue of retirement benefits or refusing to address them can be a big mistake. It’s important to understand that while divorce in Indiana calls for equitable division of assets, that does not always mean equal. Further, these funds are not automatically split in a divorce.
Individuals need to protect themselves against losing retirement assets to which they are entitled because it could mean the difference between aging in comfort and struggling financially through the golden years.
If you and your spouse are handling your divorce through mediation, you should at least consider hiring a divorce lawyer to help advise you on key issues. Otherwise, you risk making uninformed decisions that could cost you much more than legal fees in the long run.
It’s imperative to learn as much as possible about benefits that accrued during the marriage. It can be very difficult if not impossible to return to court after the divorce agreement has been signed to request a modification for more benefits because you didn’t learn about assets until later. (If it was purposely concealed from you, that may be a separate issue.)
Although retirement benefits can be split straight down the middle, there may be other ways to handle it. For instance, if a couple has more than one retirement account between them, the court may seek to equalize them. So if the husband’s retirement account is worth $100,000 and the wife’s $60,000, the agreement might allow wife to retain all her benefits, plus receive $20,000 of the husband’s. That will mean both parties receive $80,000.
If a traditional pension plan is involved, it may be necessary to hire a pension actuary to ascertain total value of benefits.
You will want to carefully consider waiving the right to benefits in lieu of other property, like the house. This is a pretty common arrangement, but it’s not always the wisest choice. Owning a home might seem like the better deal, but many people find after a few years they are unable to afford the taxes, the mortgage or the upkeep. They could sell it, but there is no guarantee it will be worth the same, and the seller will probably incur a large capital gains tax.
Understand that if you do decide to request your soon-to-be-ex-spouse’s retirement benefits, you must obtain a qualified domestic relations order, also known as a QDRO. This is signed by the judge and submitted to the administrator of the plan. This is critical because if the plan administrator doesn’t have proper documentation of the legally-binding agreement, the agreement won’t be honored.
Indiana Family Law Attorney Burton A. Padove handles divorce and child custody matters throughout northern Indiana, including Gary and Hammond.
Additional Resources:
Splitting up retirement assets in a divorce, Sept. 13, 2013, Bankrate.com
More Blog Entries:
In re: Marriage of Honer – Valuation of Marital Assets, June 18, 2015, Indiana Divorce Lawyer Blog