How are retirement accounts divided in a high-asset divorce?

On Behalf of | Jan 29, 2025 | Firm News |

Dividing assets in a divorce creates challenges when retirement accounts and pensions are involved. These investments often make up a large portion of a couple’s wealth, especially in high-asset divorces. Handling them correctly ensures a fair settlement.

Finding and valuing retirement accounts and pensions

Both parties need to locate all retirement accounts and determine their value before dividing them. This process includes reviewing 401(k)s, IRAs, pensions, and other work-related plans. Calculating accurate values requires checking account balances, vesting schedules, and future benefits. Financial professionals can provide clarity by determining the current value of future pension benefits.

Knowing what counts as marital property

New Hampshire law determines whether retirement savings qualify as marital property or separate property. Contributions made before the marriage or after the date of filing for divorce often count as separate property. Courts generally divide only the portion earned during the marriage, as New Hampshire follows an equitable distribution system. Carefully reviewing financial records helps distinguish marital assets from separate ones.

Using a qualified domestic relations order (QDRO)

The QDRO allows the division of specific retirement accounts without penalties or taxes. It must follow federal rules and comply with the terms of the retirement plan. Crafting a clear and accurate QDRO prevents complications during the division process.

Thinking about taxes

Taxes significantly impact the actual value of retirement accounts. Traditional retirement accounts incur income taxes on withdrawals, while Roth accounts grow tax-free. Understanding the tax implications for each account type ensures equitable distribution.

Dividing retirement accounts requires careful planning to secure financial stability for both parties. Consulting financial planners helps create a settlement plan that supports long-term financial goals.

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