Dividing Retirement Assets During a High Net Worth Divorce
Divorce is a trying time, and when it involves high net worth assets, there are more factors to consider. One of the most significant assets to divide in a divorce is retirement accounts. Retirement accounts are often one of the most complex assets to divide in a high net worth divorce. In this guide, we will explore how to divide retirement assets during a high net worth divorce.
Understanding the Types of Retirement Accounts
The first step in dividing retirement assets during the high net worth divorce process is to understand the types of retirement accounts. There are two main types of retirement accounts: defined contribution plans and defined benefit plans. Defined contribution plans are 401(k) plans, 403(b) plans, and IRAs. Defined benefit plans are pensions.
Division of Defined Contribution Plans
Defined contribution plans are relatively simple to divide, as the value of the plan at the time of the divorce is the amount to be divided. This value can be split in various ways, depending on the agreement reached by the parties. One party may receive the entire amount, while other assets are divided.
Division of Defined Benefit Plans
Pension plans are far more complicated to divide in a divorce. The benefits of pension plans are often based on years of service, the age of the individual and their highest three years of earnings. The division of pensions can be accomplished through either seeking a cash payout, a shared interest in a deferred annuity, or a series of payments over time.
Tax Implications
The division of retirement assets may create tax implications. Tax that arises from the valuation and subsequent allocation of these accounts must be closely evaluated. Tax-exempt funds could be segregated without the issue of tax obligations.
Legal Counsel
Dividing high net worth retirement accounts can be challenging. It’s wise to involve legal counsel at the commencement stage. A family law attorney will assist in completing and filing the documents and agreements needed to officially divide the assets in your favor.
High Net Worth Divorce Attorney
Dividing retirement assets is one of the most challenging aspects of a high net worth divorce. However, with the help of experienced attorneys and a detailed understanding of retirement accounts, you can navigate retirement asset division successfully. Before making the final settlement agreement, it is critical to take proper steps in dividing them to meet your needs and future retirements. Let the legal experts at The Fox Firm give you the guidance you need. Contact us today to schedule a consultation.