Maintaining financial stability post-divorce is often one of the biggest concerns of Florida couples. If you have built up a solid retirement fund, you may worry about losing all or some of it to your spouse in a divorce.
The first step in determining what is likely to happen to your retirement fund is to identify which portion of it is marital property.
Only marital property is divided in a divorce
Marital property is generally property that was acquired during marriage or a portion of property that increased in value during marriage. Separate property is property acquired before marriage, gifts or inheritance, with some exceptions.
In terms of a retirement fund, all or some of the fund could be marital property. If you started your retirement fund after getting married, there is a good chance the entire fund will be considered marital property.
However, if you started your retirement fund prior to marriage, only the increase in value during marriage could be marital property. For example, if your retirement fund had a value of $200,000 when you got married and a value of $300,000 on the date you separate from your spouse, only $100,000 is considered marital property.
Equitable distribution
When dividing marital property, Florida law follows the equitable distribution model. This means that marital property is divided in a way that meets standards of fairness, which does not always mean equally.
You and your spouse can agree on what happens to retirement funds. Sometimes when both spouses have retirement funds that are nearly equal in value, they decide to keep their own funds.
When retirement funds are unequal in value, equitable distribution rules might dictate that the funds are split in a way fair to each spouse. An alternative solution is one spouse receiving another asset in exchange for a portion of a retirement fund.
Qualified domestic relations orders
Retirement funds are split through a qualified domestic relations order (“QDRO”). This is a special document designed to avoid tax penalties typically associated with taking money from a retirement fund early.
QDRO’s have strict requirements that vary depending on the company managing the retirement fund. It is important to adhere to these requirements to avoid tax penalties.
