Couples divorcing after retirement have a very different set of concerns than those divorcing earlier in life. Older partners generally do not have child custody and support concerns. However, these couples likely face a complex asset division, including various financial accounts they have built over a lifetime.
When one or both spouses retires from a business venture, professional practice or financial career, they may share high and complex assets beyond the family home and household items. Dividing assets such as IRAs, 401(k)s and pensions is more complicated than simply dividing them in half. There are legal and tax implications to consider.
What is a QDRO?
Since one spouse typically owns his or her individual retirement accounts, the couple may have to ask the court for a qualified domestic relations order to obtain a share of each other’s accounts. This QDRO authorizes the plan administrator to distribute funds from the account to a qualified relation of the owner, in this case, the former spouse. The QDRO must name the amount or percentage of the benefits the spouse will receive from the accounts.
If retirees already receive benefits from a pension, it can be easier to divide them in a divorce. A couple may include in their QDRO that the former spouse can receive a percentage or a dollar amount from the pensioner’s fund. For IRAs, however, the divorce decree itself should specify how to divide the money in the account. Retirees should be aware of the potential tax penalties for withdrawing or transferring funds from an IRA.
Thinking of the future
A post-retirement divorce involves many risks. Whether the breakup is unexpected or planned, the potential for financial setback is real. Having strong and skillful legal representation may minimized the struggle.