There are several financial changes that you’ll likely experience following a divorce. One of these changes has to do with dividing retirement accounts. If you’re a Tennessee resident, here are some things you should know about ensuring your retirement funds are divided fairly.
Division will be based on your state of residence
When it comes to dividing retirement accounts, the state that you reside in plays a huge part. The courts will also consider whether you acquired the funds during your marriage or before you were legally married.
If you live in a community property state, such as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, any of the assets you or your spouse acquired while married will be evenly distributed in a divorce.
However, if you live in an equitable distribution state–Tennessee falls in this category–the judge will start the process of dividing the retirement accounts fairly although the split will not necessarily be equal.
Gaining access to retirent fnds after a divorce
If you have a 401k and need to know about dividing retirement accounts, it might be a good start to fill out a QDRO, or qualified domestic relations order. If you and a 401k and your spouse doesn’t, half of your retirement account will go to your spouse. The spouse receiving the funds can choose to have the money distributed over months or years or receive the total amount at once.
With an IRA, half of the money earned during the marriage will be transferred to the IRA for the other spouse to benefit from. If you or your spouse withdraw from the account before you are 59 1/2 years of age, you will have to pay withdrawal penalties. The funds from the IRA will also be taxed normally.