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How do retirement plans factor into property division?

Dividing marital wealth can be a challenge, especially for Arizona couples who have a diverse blend of asset types. Retirement savings often play a significant role in the property division process. Savvy spouses will take the time to educate themselves on how these assets are divided, so that they can structure a negotiation strategy that meets their own particular set of needs and goals.

When a marriage comes to an end, the general rule of thumb is that any retirement savings that were attained during the course of the marriage are subject to division during divorce. This is true of money that an individual spouse set aside for retirement, as well as employer contributions. Retirement savings that were in place at the time of marriage will usually be considered separate property. In some cases, it can be helpful to calculate the rise in value on the assets that were already set aside when the marriage took place in order to remove that value from the pool of divisible assets.

Once a couple has determined how to split the value of retirement savings, the next step involves the transfer of funds. In order to avoid tax penalties, divorcing spouses must roll retirement funds directly from one account into another. This is accomplished by means of a qualified domestic relations order (QRDO), which is a document that is carefully drafted by an attorney or other divorce professional and then submitted to the court for approval. Once that step is complete, the QRDO is forwarded to the appropriate company so that the funds can be transferred.

It is imperative that Arizona spouses become familiar with how retirement savings are handled within a divorce prior to property division negotiations. Having a clear game plan in place can help ensure that the outcome of a divorce is in line with one's financial goals. For many couples, retirement savings comprise a significant portion of marital assets, and the division of that wealth should be undertaken with care.

Source:, "How retirement plans get divided in a divorce", Thomas Trutschel, Jan. 20, 2016


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