There are many issues that come to the forefront when a New York couple decides to get a divorce. Of highest priority is children, custody, the dividing of assets, bank accounts and the valuation of property. Next, there are other matters, like retirement accounts, that must be navigated. As the divorce proceeds or is completed outright, there are strategies that couples should take with their retirement accounts.
When a retirement plan is split between parties, it is necessary for there to be a Qualified Domestic Relations Order. This is a document that will detail the division of the assets. Often, this must also be presented to the provider of the retirement plan. There are alternatives that must be remembered such as one spouse having the option to withdraw money from the former spouse's retirement account without having to pay an IRS penalty.
With a retirement account, there will also be a beneficiary designation. This must be changed even if a will has been altered to account for the divorce. Many people forget about this because they think changing the will is sufficient. If the retirement account is not changed, it can be inherited by a former spouse even if the person remarries. For people who were married for more than 10 years prior to the divorce, it might be possible to get half of the Social Security benefits of the other spouse. It is not possible to claim both, so the amounts must be compared to see which is higher. For those who remarry before age 60, they cannot collect Social Security from the other spouse's work record. If the other person remarries, it will not affect Social Security.
Investments must also be factored in. The new situation will inevitably change an investment strategy when it comes to willingness to take risks or be more conservative. Finally, retirement savings are important. The circumstances are different with a single person than they were as a couple and contributing to a retirement plan needs to be one of the key decisions on a regular basis. Disputes are often part of the process with a divorce with property division coming to the forefront. Retirement accounts are in that category and must be dealt with appropriately with help from an experienced attorney.
Source: Forbes, "5 Retirement Moves For Recently Divorced Couples," Marilyn Timbers, April 27, 2017