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How to Divide Retirement Plans in a Marital Settlement Agreement

Saturday, 26 February 2011

blog-logoIf you are getting divorced in Colorado, you may have heard that the marital settlement agreement is the hardest part.  While it all depends on how long you have been married, and how complicated your finances are; the division of marital assets is never easy.

As a Colorado Springs divorce lawyer, I’ve seen some couples struggle with every line of these agreements, while others get stuck on one issue – retirement plans.  The problem with dividing retirement plans in a divorce is that one party usually has a larger retirement plan than the other.  The person who has earned the larger share of the money often has a sense of “entitlement”, which can further complicate matters. 

In many marital settlement agreements, the retirement plan is the largest asset a couple owns.  These assets go beyond the standard 401K plan to include pensions, IRAs, stock options, business investments and profit sharing.  It would be a lot easier if couples would be willing to divide their assets 50/50, but that is rarely the case.  Marital property laws will determine the portion of each party’s retirement plan that is considered “marital property” before assets can be divided equitably.  These calculations are best made by an accountant or a tax advisor. 

When each party has their own retirement plan, it may be easier to let each person keep their own plan, but before you choose this option be sure you understand exactly what you will be giving up.  Your attorney may start this process by requesting a full disclosure of each party’s individual retirement assets, and how much of the total value was earned during the marriage.  Before your marital settlement agreement is finalized, they will do a real-time valuation of every retirement asset included in the settlement. 

Dividing your assets may involve several different distribution methods.  The funds may be rolled over from one account to another, or you may decide to take a lump sum at the time of the divorce and invest it in a different account.  Your attorney may need to draw up a Qualified Domestic Relations Order before a retirement plan can be divided.

For help in determining the value of your assets and the best way to divide them in a marital settlement agreement, contact a Colorado Springs divorce attorney from the Marrison Family Law LLC.

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