Special Considerations for New York Baby Boomers Facing Divorce
As if dividing the family home and personal property were not difficult enough, divorcing baby boomers also need to carefully review settlements to ensure retirement accounts are handled correctly. Retirement assets are a unique piece of property that must be treated carefully during the division of assets portion of the divorce proceeding. Hefty fees and penalties can result if certain forms are not completed and filed with the court.
General info on splitting retirement assets
Before going over the necessity of using certain forms, it is also important to be aware of the significance of retirement assets. The basic principles of finances tell us that contributions to these assets early in life compound over time, providing a much larger figure as time passes. Adding money to the account now does not have nearly as much impact as the same amount added twenty years ago. Couples may plan for retirement together, having one spouse add more to his or her 401k or other plan then the other, possibly to take advantage of employer contributions or other incentives. Regardless of who holds the account or which spouse has more in a retirement account, the funds are generally treated as marital property. This means that each spouse has a right to at least a portion of the funds.
Actually receiving these funds after the divorce is finalized can be difficult. In many cases, a Qualified Domestic Relations Order (QDRO) is needed to split a pension or 401k. This document allows funds that are in a retirement account to be withdrawn without penalty. This is only one of the unique considerations to consider when dividing retirement accounts. Additional federal rules can apply and rules also vary depending on what state the couple lives in.
Splitting retirement assets in a New York divorce
Pensions in New York can often be shared with an ex-spouse. However, New York State’s State & Local Retirement System specifically notes that retirement benefits will not be paid to an ex-spouse based solely on a separation agreement or judgment of divorce. In order to split this asset, the state generally requires completion of a Domestic Relations Order (DRO) explaining the division of benefits. This legal document will provide the instructions for how the asset is split and legally binds the Retirement System to provide these benefits to the ex-spouse.
These are just a few of the issues that can arise in a divorce. Those going through a divorce should contact an experienced New York property division lawyer. This legal professional will be able to discuss the options that are available and help to better ensure you receive a settlement that meets your needs.