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Retirement funds biggest overlooked asset in property division

Dividing property can be the most complicated part of any divorce. Arkansas law requires that all marital property be equitably distributed before a divorce is finalized. Marital property includes all assets and debts that a couple has accumulated during the marriage, all business assets and even individual retirement accounts. Too often, though, individual retirement accounts are overlooked by separating spouses.

IRAs can be quite valuable and a potential resource that can help someone avoid some of the financial difficulties that many spouses experience after divorce. The first step in ensuring equitable division is identifying the accounts in question. If a person has switched jobs, there may be more than one IRA or 401(k).

How an account is regulated is an important consideration. Some accounts, such as IRAs, are subject to state laws, but others, such as pension plans and 401(k) plans, are governed by federal law. Generally, only the amount accrued during the marriage is brought to the table for division, but there can be exceptions, depending on a specific case. A professional can help determine the exact nature and value of such accounts.

After property division is complete, the next step is to make the division official by filing a qualified domestic relations order and sending it to the judge presiding over the divorce for approval. A QDRO is especially important, because retirement benefits have special legal requirements that are not applicable in general divorce agreements. If the legalities are not addressed during property division, later modifications are usually difficult.

Any money acquired from a separated spouse’s retirement plan should be deposited into a new retirement account. The choice is usually between a standard market product such as a mutual fund and a self-directed account. Investing in property may be a good use of the money, but whatever decision is made should be carefully thought through.

Source: Huffington Post, “The #1 Most Overlooked Divorce Asset,” Daniel Sentell, Oct. 2, 2014

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