Retirement Accounts in a Miami Divorce

In a Florida divorce, retirement benefits built up during the marriage are marital assets, whether or not they have vested, while savings from before the marriage are generally nonmarital. Employer plans such as a 401(k) or pension are usually divided through a qualified domestic relations order (QDRO), and IRAs through a transfer incident to divorce.

Which Part of a Retirement Account Is Marital?

Retirement savings are often among the largest assets in a divorce. Section 61.075(6)(a)1.e, Florida Statutes, makes all vested and nonvested benefits accrued during the marriage in retirement, pension, profit sharing, annuity, and deferred compensation plans marital assets, and Section 61.076(1) says the same.

In practice:

• Vesting does not control. Employer contributions that have not vested can still be marital if they accrued during the marriage.
• The name on the account does not control. A 401(k) in one spouse’s name is still marital to the extent the benefits accrued during the marriage.
• Premarital savings are nonmarital. Under Section 61.075(6)(b)1, what you had before the wedding is nonmarital. Tracing it usually requires older statements, and growth on a premarital balance can be disputed. See separate (nonmarital) property.

Once the marital share is identified, Section 61.075(1) directs the judge to begin with the premise of an equal division. Rule 12.285 of the Florida Family Law Rules of Procedure requires each spouse to produce 12 months of plan statements and the summary plan description.

Two Dates That Matter

The cutoff date. Under Section 61.075(7), the date for deciding what is marital is the earliest of the date the spouses enter into a valid separation agreement, another date that agreement expressly sets, or the date the divorce petition is filed. Deposits made after that date generally fall outside the marital share.

The valuation date. The same subsection lets the judge pick the valuation date or dates that are just and equitable, and different assets may be valued as of different dates. Because balances move with the market, any settlement or order should state the valuation date and how later gains or losses are shared.

Dividing a 401(k) or Pension: The QDRO

A divorce judgment by itself does not move money out of an employer plan. The IRS notes that most plans will not pay a former spouse any share of a participant’s benefits until a qualified domestic relations order (QDRO), a court order directing the plan to pay that share, has been filed with the plan administrator.

The order must state the amount or percentage each person receives, and it cannot award a benefit the plan does not offer, so it is wise to have the plan review a draft before the judge signs it. For the Florida Retirement System Pension Plan, for example, the Division of Retirement grants conditional approval of a QDRO before it is filed with the court.

With a pension, the order divides a future monthly benefit rather than an account balance, and the marital share is often measured by comparing the time in the plan during the marriage with the total time in the plan.

Dividing an IRA: Transfer Incident to Divorce

An IRA is not an employer plan and follows a different path. The IRS explains that when an interest in a traditional IRA is transferred to a spouse or former spouse under a divorce decree or a related written document, it becomes the receiving spouse’s IRA from the date of the transfer, and the transfer is tax free. The usual methods are changing the name on the IRA, when the whole account moves, or a direct transfer between IRA trustees.

Withdrawing cash and writing a check is not the same thing, and the tax result can be very different.

Other Ways to Divide Retirement Savings

Not every account has to be split. One spouse can keep a retirement account while the other receives other marital assets of similar value, and Section 61.075(10) allows the court to order a lump sum or installment payment to carry out an equitable division. Because amounts in a traditional IRA generally are not taxed until distributed, a dollar of pretax retirement money may be worth less than a dollar of cash or home equity. A CPA can help compare options.

Protecting Your Retirement Savings

• Gather statements showing the balance on the date of the marriage and on the date of filing.
• Consider a premarital or postnuptial agreement; Section 61.075(6)(b)4 treats assets excluded by a valid written agreement as nonmarital. See prenuptial agreements.
• Talk to your lawyer before making large withdrawals or taking loans against an account during the case. Intentional dissipation of marital assets is a factor the judge may weigh under Section 61.075(1)(i).
• Have the QDRO prepared while the divorce is still open, not years later.
• Review beneficiary designations after the divorce, as the IRS suggests.

Talk With a Miami Divorce Attorney

Retirement division involves Florida property law, plan rules, and federal tax rules at once. Attorney Arturo Alfonso handles divorce and property division cases in Miami-Dade County and can help you identify the marital share, negotiate the division, and coordinate the QDRO or IRA transfer. For more detail, read how a 401(k) or pension is divided in a Florida divorce, or explore the firm’s family law services and high net worth divorce representation.

Call (305) 266-9584 or contact the firm to schedule a free consultation. Se habla español.