The end of a marriage can have a major impact on the current and future finances of a Hawaii couple. In many cases, retirement accounts are some of the largest assets held by spouses. Especially if they have been married for many years, a divorce may mean a substantial division of these funds between the two parties. Even when retirement is years away, divorce can still have a serious impact. That’s why it is important to understand how ending a marriage can affect different kinds of savings plan.
Even though retirement funds are often held in one person’s name only, they are generally considered marital property. This is almost always true for the funds’ increase in value during the length of the marriage. Therefore, longer marriages may have a more significant effect on property division than a short marriage. This applies to IRAs as well as 401(k) plans and other pension funds. Even though pension funds are tied to one spouse’s job, they are considered marital assets.
Social Security can also be affected by divorce, but mainly in the interests of a lower-earning partner. If the marriage lasted for 10 years or more, the former spouse could take their own Social Security benefits or opt for a payment that is one-half of their former spouse’s benefit. Choosing the latter would have no impact on the former spouse; he or she would continue to receive 100 percent of the Social Security benefits owed.
When dividing a pension plan or 401(k) in a divorce, it is important to operate according to the law to avoid taxes, fees and other costly premiums. A family law attorney can work to draft and obtain a Qualified Domestic Relations Order (QDRO), the court order necessary to divide these accounts.
