Divorce and Retirement Accounts
Recently we’ve had numerous inquiries regarding how retirement accounts are dealt with during divorce proceedings. Our divorce lawyers in Las Vegas offer the following for your review. This is for general informational purposes only. Each divorce case is has a separate set of case facts. Therefore, you should always directly consult with a divorce lawyer to understand your individual rights. Unless otherwise clarified by a prenuptial or post nuptial agreement, all community property must be accounted for and divided in a divorce. Retirement plans can be some of the trickiest assets to divide and distribute during a divorce.
Retirement Plans (401(k) plans, SEPs, Keoghs) Are Community Property
Under Nevada law, all property acquired during the marriage is considered community property unless the aforementioned agreements are enforceable. Like all community property retirement accounts are divided upon divorce. All forms of retirement accounts–individual retirement accounts (IRAs), 401(k) plans, simplified employee pension plans (SEPs), whether established individually or as part of an employee benefits package–are subject to division upon divorce. Even if the retirement account was established before the marriage, any funds deposited into the account during the marriage are marital property, and thus associated gains are divisible in divorce.
Valuing a Retirement Account
Dividing up a retirement account in divorce can be a complex procedure. First, the value of the account must be established. Valuation differs depending on the type of account. Defined contribution plans like 401(k) plans or SEPs involve an employee contributing pre-tax dollars to an account (with potential employer matching) and the employee eventually cashing out either in a lump sum or via periodic payments. Defined contribution plans appear deceptively easy to value: Simply look to the balance of the account. If part of the account started before the marriage, the value attributable to separate property may need to be determined.
Of course, the parties will need to determine when the account should be valued–at the time of filing for divorce? When the divorce is ready to be finalized, possibly a year or several years after filing? The difference can amount to thousands of dollars.
Defined benefit plans are more complicated. In these plans, employers make all the contributions and employees contribute nothing. The employee will receive the balance in the form of a monthly payment upon retirement, varying in amount depending on the job, the employee’s age, and the number of years worked. Valuing these sorts of accounts will require a CPA or other financial expert.
QDROs and Dividing Retirement Accounts
Once an account is valued, it must be divided and distributed. The easiest way to go about dividing the retirement account is to not divide it at all. Let the party with the account keep the entire balance, and give the other spouse property, funds, or assets equal in value to their share of the retirement account.
If the parties do wish to divide the account itself, they will need to go through additional legal hurdles. For accounts that fall under the purview of the Employee Retirement Income Security Act (ERISA), the parties will need to obtain a Qualified Domestic Relations Order (QDRO). QDROs give plan administrators the authority to distribute plan funds to someone other than the named plan participant. QDROs are complex court orders. Discuss the matter with your Las Vegas divorce attorney to ensure you understand what needs to be done.
Avoiding Tax Penalties
It’s important to keep taxes in mind when dividing a retirement account. Retirement accounts typically have tax benefits that apply only when the plan owner or participant waits until retirement to collect. Dividing up a plan at the time of divorce may trigger tax penalties unless done correctly (such as through the use of a QDRO and/or a rollover IRA account). Your divorce lawyer can inform you of the best way to distribute retirement funds during divorce without triggering unnecessary tax consequences.
Ensure Your Retirement is Protected in Your Las Vegas Divorce
Our dedicated divorce lawyers in Las Vegas are ready to help you navigate all aspects of your divorce case, from complex asset division to child custody and spousal support. Divorce attorneys Jennifer V. Abrams and Vincent Mayo offer courtesy phone consultations at no charge. Call 702-222-4021 to speak with one of them about your important divorce matter concerns.
Holidays and Co-Parenting
In many co-parenting plans, children typically spend Thanksgiving with one parent in even-numbered years and the other parent in odd-numbered years. In some cases, this pattern repeats for all holidays. Regardless of which parent the children will be enjoying which holiday with, there are several issues that co-parents may need to be aware of.
First, how children enjoy the holidays is influenced by the age of the children involved. Younger children, in general, tend to focus their attention on what’s going on in the moment. Older children, especially teenagers, use more of their consciousness for reflection. This is normal child behavior and, by itself, does not indicate favoring one parent over the other. So don’t worry if your six-year old is having the time of their life but your teenager is not.
Second, children often feel some level of anxiety and concern for the parent who will be spending the holiday without them. Sometimes, these feelings are exacerbated when the non-custodial parent exhibits sadness and when the custodial parent shows no consideration for the non-custodial parent.
Alleviating these feelings can be very simple. Custodial parents should not only allow, but encourage the children to call the non-custodial parent to wish him or her a happy holiday. The non-custodial parent should encourage the children to enjoy the holiday with the other parent. Both parents should be considerate and flexible with one another. Letting the children know that it’s okay for them to enjoy the holiday with one parent at a time will alleviate negative feelings and greatly enhance their happiness.
Tips from Our Divorce Lawyers in Las Vegas
If you and your former spouse get along well, you might suggest spending some combined time with your children on a holiday. The more children seeing their parents cooperate with one another, the more secure they feel. If you and your co-parent are not on good terms, initiate an agreement via e-mail to “go the extra mile” on the holidays for the benefit of your children. If you are the parent whom the children are spending the holiday with, do your best to encourage your children to contact their other parent. A little cooperation will make the holidays more enjoyable for everyone.
Help With Your Divorce
Our seasoned divorce lawyers in Las Vegas are prepared to help you resolve all issues relating to your divorce proceeding, including child custody, parenting plans, property distribution, alimony, and others. Our Nevada divorce law team is ready to help. Divorce attorneys Jennifer V. Abrams and Vincent Mayo offer courtesy phone consultations at no charge. Call 702-222-4021 to speak with one of them about your important divorce matter concerns.