When you go through a divorce in New York, you're likely to face the division of your marital property. Marital property is defined as anything gained while you were married. This may include a business, a home and even your retirement accounts. Understandably, people want to know what's going to happen to their retirement funds during a divorce. Read on to learn some of the obstacles you may face and the options at your disposal regarding your retirement funds.
Knowing the difference between assets and cash
One of the sneakiest things one spouse may do during a divorce is to offer you assets such as an IRA for cash. Accepting assets such as a traditional IRA may not be a good idea as there are tax implications you may have to deal with. For example, $50,000 in a checking account will be taxed differently than an IRA with $50,000 would be.
What happens to my 401(k) or pension account?
Because these types of funds are considered marital property, a judge will order them to be divided. This is done through a qualified domestic relations order, or QDRO. In this situation, one spouse may ask that the funds be distributed or rolled over onto their own accounts. It should be noted that the spouse receiving the funds may still have to pay certain federal and state taxes.
One of the most common mistakes made after a divorce is forgetting to update the beneficiaries within your estate plan. Often, one person will forget to remove their former spouse from their plan. This can lead to long legal battles among family members once one of the former spouses passes away.
Divorce is never an easy process no matter how many times you've gone through it. You may want to obtain the legal aid of an attorney as soon as possible to help protect your financial future.