Important Issues Regarding Retirement Assets
Often, retirement accounts are the largest asset that the family has. It is important to understand issues regarding these accounts to ensure that you have the best shot at an advantageous settlement or trial.
When there are retirement assets involved in a divorce, there are special considerations to understand. Retirement assets might include such plans as the following:
- Traditional pension plan
- 401(k) or 403) B
- Roth IRA
- Savings accounts
- Special governmental plans
Each of these come with their own set of challenges. What works for one might be a disaster for another. If your attorney does not recognize that distinction, then you could be severely disadvantaged.
We see three serious mistakes that attorneys often make in dealing with retirement plans:
They fail to properly value the plans. Often the employee, the employee’s spouse and even the attorney rely on the “value” of the plan as listed in the plan statements. Not only is this frequently NOT the true value, the true values are sometimes several TIMES this amount. If you don’t know that value, then you could easily lose a significant part of the community property.
They fail to take tax consequences into account. There are significant tax consequences to many retirement plans. A pension is different than a 401(k), which is different than an IRA, which is different than a Roth IRA. If your attorney does not adjust the value of the plan for taxes, then how can you even make a decision on settling the estate.
They fail to take the difference of the spouses’ tax situation into account. Again, if you don’t look at the different tax circumstances of the parties, you may be leaving money on the table. With good tax planning, it might be possible to reduce the overall tax effect of the divorce. If you do that, then “Uncle Sam” may have just funded part of your divorce.
There are other things to look at in dividing retirement plans in a divorce, but these are three of the most common AND the most overlooked.
When either party to a divorce has some form of a retirement plan, it is imperative that you seek qualified advice before you make any moves. We have seen many cases where the other party has left quite a bit of money on the table. Don’t let that happen to you.
Also see Mortgage and Divorce
Board Certified Family Law Attorney Bob Leonard
Law Office of Bob Leonard Law Group, PLLC
Open: Monday-Friday, 8:00 AM to 5:30 PM
in Fort Worth, Texas
Attorney Services Areas for Bob Leonard Law Group, PLLC Family Law Practice