Gray divorce often involves retirement instead of custody issues

For Colorado couples divorcing in their 50s and later, the process often looks very different from couples who divorce in their 20s and 30s. When we help couples ending their marriages at this stage in life, the process is often more amicable than ending shorter relationships. Partners may have grown apart, and each prefers to go his or her own way. If your children are adults, custody and child support issues are not relevant.

Kiplinger reports that splitting retirement accounts is often a primary concern for those in long-term marriages. Following specific rules is critical for dividing your IRAs and 401(k) plans. Failure to do so can result in an unexpected tax bill or significant penalties. For high earning couples, the financial situation can be complex as each may have multiple pensions, IRAs and 401(k)s, making equitable property division challenging.

Be realistic about splitting retirement assets

Dividing retirement accounts is tricky. Annuity contracts vary, and you may have to choose whether to take a financial hit and cash out an annuity or trade off other assets. Since you are going from one household to two with the same amount of set income, something has to give. Prepare yourself; regardless of how amicable the agreement, finances generally take a hit.

Unless you and your soon-to-be ex agree that you will not split some accounts, assume everything will be marital assets. While many couples decide on a 50-50 split, it is generally not that simple. For a 401(k), you need a Qualified Domestic Relations Order, which is a court order signed by a judge. Every employer has different rules about splitting pension funds, and you must determine the value of each before dividing it. IRAs do not require a QDRO, but the details regarding their division must be in the divorce decree.

An equitable property division considers several factors, from the length of the marriage to the income potential of both parties. Retirement assets also include diverse requirements. Ensuring a fair outcome for everyone involved takes time and knowledge of the law as well as tax regulations. For more information, please visit our webpage.