Whether you are in your 30s or 50s, divorce can mean re-evaluating your lifestyle and your plans for the future. The closer you are to the age when you hope to retire, the more frightening financial changes can seem.
Divorce usually means splitting up your property with your ex and also incurring all of the expenses of maintaining a home without someone else to help pay. Budgeting and otherwise planning for the future when considering a divorce requires that you have an honest understanding of your situation and the assets that will help support you in the future.
Looking at how the courts will split your property can help you estimate what resources you will have. Is the retirement account you have built over the course of your career at risk as part of your divorce?
Can the courts divide retirement accounts or pensions?
Family law judges have the authority to enter property orders instructing couples to sell or divide all kinds of property. Unless you have a marital agreement that discusses your retirement account, the chances are good that at least some of the account’s value accrued during the marriage will belong to your spouse.
Indiana applies the equitable distribution standard to marital property. Everything you earn, purchase or otherwise acquire during a marriage belongs to both you and your spouse. In a divorce, you each have a claim to a fair share of that property. Even assets held in just one person’s name, like a retirement account or pension, can get split between spouses during divorce proceedings.
Will your account take a hit because you are too young to withdraw from it?
As if needing to split the account with your ex isn’t enough financial pressure, you may also find yourself worrying about how much you might lose in taxes, penalties and fees because of an early withdrawal.
Tax-deferred retirement programs usually have penalties for those who make withdrawals before they reach retirement age. Thankfully, those kinds of penalties do not apply to an account divided as part of a divorce. If the courts approve a Qualified Domestic Relations Order (QDRO) splitting your property, then the division of the account in accordance with that order will not result in any penalties for you or your spouse.
Trying to protect retirement savings and other major assets is a common concern for those thinking about a divorce. Learning more about state laws and the status of your different assets can help you plan for a successful divorce.