Typical California Divorce Settlements and Retirement Accounts
How do typical California divorce settlements treat retirement accounts? It’s a pervasive question, and one that many Californians facing divorce need to ask. In most cases, 401(k) and pensions are divided by a qualified domestic relations order or QDRO.
What is a QDRO? The Qualified Domestic Relations Order (QDRO for short) is a legal document that provides instructions through a court order to the Plan provider regarding the community and separate property aspects of the 401(k) or pension. The document includes instructions and allows the Plan provider to make payments non-employee ex-spouse per the California divorce settlement.
Individual Retirement Accounts (IRAs) are usually divided by a rollover or other methods that provide tax advantages. Most benefit from seeking the advice of a tax professional.
In a typical California divorce settlement, not everything has to be sold or divided. Sometimes one asset can offset another asset. For example, $200,000 of home equity can be offset by $200,000 in a bank account as long as both are considered community property. When considering an offset in connection with a retirement account during your California divorce settlement, remember to consider the volatility of real estate prices, tax advantages associated with specific assets or accounts, and other details that could alter the long-term value of either asset. For example, $200,000 of home equity may not be as secure as $200,000 in an investment account that is earning consistent interest.
A couple’s retirement plans are usually their most valuable asset outside of their home. According to California community property rules, retirement plans build during a marriage are treated like any other marital assets – they are typically divided in half. Non-participant spouses receive 50% of the value of the retirement plan accrued during the length of the marriage.
If you need help dividing retirement plans during a divorce contact The Maggio Law Firm, we have the experience and knowledge you need on your side to protect your financial interests during California divorce.
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