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Dividing retirement assets in a divorce

During different stages of life, couples in California have different focuses. The same is likely true for couples who are going through divorce. For example, couples with small children may be more concerned about child custody and support while older couples may be more concerned about asset division. Those in the latter group may not fully understand the unique aspects of certain assets. In fact, some assets, such as retirement accounts, require special consideration to ensure an equitable distribution and to avoid costly penalties.

Retirement accounts are treated differently during division. For example, a 401(k) or pension require a qualified domestic relations order. With this judicial decree, a spouse is able to make a withdrawal without facing a 10 percent penalty for doing so early. However, he or she will have to pay taxes unless it is rolled over into another retirement account.

When it comes to asset division of retirement funds, special consideration must be given to the type of asset. Taxes must be paid on a 401(k) upon division. However, taxes have already been paid on a Roth IRA. Withdrawals from this type of fund are not taxed during retirement. Often, couples will consider assets such as Roth IRAs separately from other retirement accounts.

The decisions that are made during the asset division portion of a divorce can have serious consequences. For many, it alters when a person is able to retire. As such, people in California may want to put more thought into how their retirement accounts are distributed. Fortunately, an attorney with experience with family law can help ensure that a person seeking to end their marriage fully understands the ramifications of how certain assets are divided.  

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