Remember to talk in percents, not dollars
The division of retirement assets is a common event in today’s modern divorces. When factoring the split of any IRA, pension fund, 401K or other such account, the cardinal rule is to always state the distribution to each spouse in terms of the percent of account value he or she will receive-never the exact dollar figure to be received.
The reason for this is clear. For the sake of example, assume you have an account that today is valued at $90,000 and you and your soon-to-be former spouse agree to each take $45,000 from it as part of your divorce settlement. Now, fast forward yourself to the date that the funds transfer is to take place on. The market has changed and your current account value is now $70,000.
Depending upon the circumstances, you may be liable to pay your partner his or her full $45,000 which means you receive only $25,000. By initially agreeing to split the account in half, you can ensure an ultimate distribution that is in line with the spirit that you actually intended, even if the value is less.
Follow the calendar carefully
Retirement account distributions that are part of a divorce agreement must be done at very specific times and in very specific ways in order to prevent federal and state taxes as well as other penalties from being assessed. Funds distributions done too early or too late will cost you a large percentage of your savings. Make sure that your transactions are done at the right times. This is one area with potential for big-and negative-tax implications of divorce if that is not the case.
Experienced legal counsel can help
The need to protect your current and future earnings is great. This is an area where the right attorney can save you valuable money down the road. Make sure to work with an experienced family law lawyer to protect your assets during a divorce.