If you and your spouse have been considering ending your marriage in Florida, you know that the decision to do this will touch every part of your lives. From a financial perspective, it will change your daily and monthly living costs as it is generally more expensive to live alone than with someone else. However, the financial implication of a divorce extends far beyond the here and now.
When it comes to your long-term retirement savings, you may well need to divide a 401K with your spouse as part of your marital property division settlement. While this is a common practice in many modern divorces, it is not something you should take lightly. Instead of relying solely on your divorce decree to outline the terms of your retirement account split, you will want to have a qualified domestic relations order.
Per the U.S. Department of Labor, a QDRO legally establishes the non-account owning spouse as an alternate payee so that money can be paid to that person directly. If the money is paid to a spouse for a property division settlement or even for a spousal support award settlement, the receiving spouse assumes liability for any taxes. This prevents the account owner from paying taxes and early withdrawal fees on distributions. Money reinvested into another retirement account may allow taxes and penalties to be bypassed altogether.
If you would like to learn more about qualified domestic relations orders and the issues around dividing retirement assets during a divorce, please feel free to visit the property division page of our Florida family law website.