A marriage is often expected to provide a framework for two people to work together in order to achieve a comfortable standard of living. When a divorce becomes reality, couples may find themselves struggling to maintain the lifestyle they once enjoyed. That makes it even more important for a Colorado spouse to take a thorough assessment of what assets may be subject to division.
Many companies offer a retirement savings account as a benefit for its employees. These accounts, often comprised of a 401(k) account, are intended to help an employee build a comfortable nest egg for retirement. In general, these accounts are not eligible for reassignment to anyone other than the worker for whom it was opened. However, in the case of a divorce, the Employee Retirement Income Security Act of 1974 and the Internal Revenue laws do make an exception for a spouse in the event of a divorce.
Certain conditions must be met before these accounts are subject to division. Once the proper forms are filed, a former spouse could possibly receive up to one-half of these savings. The usual method of division is to transfer the spouse’s portion into a 401(k) account of his or her own. This method eliminates the tax penalties that could be assessed if these monies were disbursed early. There is the possibility that these retirement accounts could also be used to meet support obligations for children, though this seldom done.
A Colorado resident who is beginning the divorce process may choose to consult with an experienced family law attorney in order to review all assets. When it comes to retirement accounts, a spouse is entitled to have the value of such accounts verified by a qualified professional. A divorce can be a time of upheaval, and the peace of mind that comes with additional financial security may be worth its weight in gold.
Source: normantranscript.com, “Don’t overlook a 401(k) in a divorce“, Julie Jason, June 25, 2017