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California divorce: The complexities of retirement division

One aspect of marital property that some spouses overlook is retirement plans.
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    January 09, 2014 /24-7PressRelease/ -- California has long been known as a community property state but when couples in San Francisco decide to call it quits, the division of marital property can be quite complex. The divorce process can extend for months and even years in some cases, when there is considerable property to be divided.

Retirement plans

One aspect of marital property that some spouses overlook is retirement plans. According to Forbes, it is not uncommon for ex-spouses to tell the other spouse that their retirement plans are off-limits because the plans come from their job and only their name is on them. However, this is often far from the truth. Even if a spouse had the retirement plan prior to the marriage, the other spouse may have a legal claim on a portion of it.

There are several kinds of retirement plans that a spouse may be able to claim. These include:
- 401Ks.
- 403Bs.
- Individual retirement arrangement (IRAs).
- Government pensions.
- Roth IRAs.
- Employee stock ownership plans.

Retirement plans are designed to provide a source of financial support in a person's later years. Therefore, a spouse should look at these plans and use them to plan for their own financial future.

Qualified Domestic Relations Orders

When a spouse determines that there are retirement plans that qualify as marital property, then that spouse should consider getting a qualified domestic relations order. This is defined by Forbes as a court order that addresses the division of certain types of retirement plans like a 401K or a pension. The order should be issued before the divorce settlement is complete and carefully prepared to avoid any difficulties.

When a QDRO is used, the retirement funds can be withdrawn and transferred without the normal penalties associated with early withdrawal, according to Fox Business. Getting the QDRO before a divorce process is completed allows for adjustments if a pension division cannot be paid out in a lump cash sum and the receiving spouse was counting on the money to pay off bills and expenses.

Keep the future in mind

Sometimes, spouses are tempted to cash out their share of retirement funds but this can create problems for that spouse later on, especially if they run into employment or financial issues. Instead, spouses should consider what they may need as they age, such as medical care. This is especially true for spouses who are older and leaving long-term marriages.

If spouses are close to retirement age, they should understand that a divorce is going to have a large impact on their retirement. USA Today points out that spouses may have to go back to work, push back their retirement date and even make large adjustments in their retirement plans.

With so many sources of retirement income now in existence, spouses should meet with an experienced attorney to discuss their options and plan for a secure financial future.

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