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Los Gatos, CA divorce attorney for 401(k), IRA, pension plansWhen getting a divorce, you will need to address a wide variety of complex financial issues. Since California is a community property state, the property division process will need to address all of the assets and debts you acquired during your marriage and ensure that you and your spouse each receive an equal share of the marital estate. Retirement savings accounts and pension plans can often complicate asset division. These assets will need to be properly valued, and the right procedures will need to be followed when dividing them between you and your spouse.

Using a QDRO to Divide Retirement Accounts and Pensions

Retirement savings often represent some of the most valuable assets owned by a married couple. These may include employer-sponsored retirement plans such as 401Ks or individual retirement accounts (IRAs). In some cases, the full balance in an account may be considered marital property. However, if one spouse contributed to an account before getting married, some of the funds in the account may be considered separate property. The assistance of a financial expert may be needed to determine the value of an account at different points in time and establish the marital portion of these funds.

Determining the value of a pension plan can often be even more difficult, since the amount that a person will be able to receive in pension benefits may not be known until they reach retirement age. The actual value of these benefits will depend on the amount of income a person receives, the amount of time they worked in a pension-eligible position, and the number of years they expect to receive benefits after retiring. A person’s ex-spouse will be entitled to receive a percentage of their pension payments, depending on the amount of time they were married while working in the job where they earned these benefits.

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Los Gatos divorce and QDRO lawyerDuring a California divorce, all community property must be divided between spouses. Unfortunately, a retirement account you have been sinking money into for years will not necessarily be all yours when you get a divorce. Even if an account is solely in your name, and you were the one earning the income, money saved during your marriage is typically considered community property. On top of giving up part of your 401(k) or pension, you may have to face penalties if you do not follow the proper procedures when splitting up the funds.

Avoiding Penalties When Dividing Retirement Funds

Even in the best divorce scenarios, both parties are likely to face some financial loss. Property has to be divided, and you will be walking away from one household to new bills in two different homes. Taking the proper steps when dividing retirement funds will ensure that you do not face additional financial penalties.

If you are the one who has to share your retirement savings, your attorney can walk you through the proper process to make sure that you do not lose more money than you have to because of penalties and early withdrawal fees. If you are receiving funds from your partner’s 401(k), you will get to keep more if you have the funds rolled over to your own retirement account than if you take the cash outright. In most cases, the best option is to use a QDRO to implement the transfer of funds.

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Posted on in Divorce

California divorce laws, California divorce attorneyAfter years of working and saving for a future for yourself and your family, you and your spouse have decided to end your marriage. During the divorce process, most clients immediately understand that the assets need to be divided. Assets include everything from debts to the money in the bank account, to the house and the items in the junk drawer (provided that it is not trash hiding in that collect all drawer). Assets also include that retirement plan on which you have been diligently working.

Who Gets the Retirement?

You earned the retirement, so naturally, you are hoping that you are the one who gets to keep the retirement plan. The reality is, retirement is an employment benefit, just like any income earned. Additionally, any profits obtained during the duration of the marriage up until the date of separation are a part of the community property. As you may know, California is a community property state, meaning that everything valued to be community property is divided equally between the two parties at the time of the dissolution of marriage.

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20 S. Santa Cruz Ave., Suite 212
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