When you end your marriage, one issue you’ll need to sort out is the process of dividing retirement assets in divorce. In most situations, South Carolina law requires the court to distribute marital assets — including a retirement fund — based on what is equitable and fair in those circumstances. If the court decides that one spouse should receive some of the retirement assets from another spouse, then it would issue a special order — a qualified domestic relations order — that gives these instructions.
The qualified attorneys Greenville divorce lawyers at Turner Family Law can help you navigate the nuanced process of dividing property during a divorce. In a time when many aspects of your life are turned upside down, it can be relieving to work with a lawyer who can give you personalized and compassionate solutions.
What Is Considered Marital Property in South Carolina?
South Carolina law requires the courts to divide property equitably when two spouses divorce, but this does not always mean it will be equal. Part of this means that most of the spouses’ assets acquired while married become part of the marital property pool. This pool might include income from employment, cars, houses, investments, bank accounts, and other assets.
However, nonmarital investments or property that increased in value during the marriage may not count as marital property. So, if someone opened up a retirement account before the marriage but didn’t make any contributions after the wedding, it might be considered nonmarital property, even if it increased in value during their union. Moreover, if the spouses signed an enforceable premarital agreement before marriage, whatever distribution they agreed to in this document may apply.
How Is Retirement Divided in Divorce?
During a divorce, the courts divide the spouses’ marital assets equitably. To accomplish this, the court would consider various factors, including each spouse’s financial and practical contributions to the marriage and the length of their union. So, who gets all or part of the retirement account would depend on the overall plan to divide assets rather than whose name is on the account or based on an equal split.
Understanding Qualified Domestic Relations Orders (QDROs)
A qualified domestic relations order is a document someone files with a retirement account provider. It gives instructions for paying money to someone other than the primary account holder. In the context of a divorce, this alternate person receiving retirement payouts would likely be someone’s former spouse. If you have already retired and would like to understand your options, consider talking to an attorney who can advise you on the legal implications of a divorce after retirement.
Tax Implications of Dividing Retirement Accounts
How and when the person receives payouts from the retirement account can have different impacts from a tax perspective. You may not have to pay taxes if you change the beneficiary as part of a divorce settlement; however, you or your spouse may have to pay taxes on, for example, a lump sum withdrawal made before retirement. Talk to a financial and tax advisor about what your options are and how to limit your tax liability during a divorce settlement.
How To Avoid Common Mistakes in Retirement Asset Division
One mistake that people may make during a divorce is to move marital assets around or change beneficiary designations to try to protect them from being discovered or divided during the separation. While this may be well-intended, moving the assets may not automatically make them nonmarital property instead of marital. Because of this, the person may still have to disclose these to the court and their spouse. Additionally, the court may not look at this favorably, so it may play a role in how they decide to divide assets between the spouses.
Special Considerations for Military and Government Pensions
If a spouse has a military or government pension, they may need to split this as part of the divorce. It depends on the rules in effect at that time — many of these change frequently — and how long the person served. For example, a spouse whose marriage lasted at least 10 years and who served in the military for at least 10 years may receive a pension divided between each spouse during a divorce. Government pensions may — but are not always — be treated and split like a regular retirement account during a dissolution of marriage.
Steps To Secure Your Fair Share of Retirement Assets
One way to help ensure that you receive a fair payout from your retirement and other assets is to work with a seasoned divorce lawyer who is familiar with high asset divorces.
They can help you understand what the law says you’re entitled to and how you can protect your right to those assets. Additionally, they can help you craft and negotiate a fair marital settlement agreement so you have what you need after the split. Lastly, consult your financial or tax planner to understand your overall portfolio and what changes you might need to make going forward to protect and maximize your investments.
Updating Financial Plans After Dividing Retirement Accounts
If you have an existing wealth management plan — which may consist of a will, trust, retirement account, or other legal asset — it may be a good idea to update these after the divorce. Your financial advisor may want to adjust your investments to increase your gains and compensate for a loss in some of your potential retirement income. Additionally, your estate attorney may change the beneficiary designations for other assets because that asset is no longer available or in the same amount as before.
Contact Turner Family Law for Help Dividing Retirement Assets in a Divorce
Ending your marriage can be a challenging and empowering decision, which can involve periods of grief and relief. Dividing up people’s assets is a cumbersome but necessary part of a divorce. Instead of going through these legal steps by yourself, consider partnering with an attorney who can guide and support you through the process.
The Turner Family Law team is prepared to help you through dividing retirement assets in divorce. J. Michael Turner, Jr., has gone through a divorce in his personal life, so he can relate to some of what you might be going through while also respecting the individuality of your experience. With decades of hands-on legal training, he has a wealth of resources and knowledge at his disposal to help you. Get in touch with our law firm today by calling 864-778-2734 to schedule an initial consultation.
