Law Office of Joanne Kleiner

retirement

Mar 03

How Do You Divide Retirement Benefits After a Divorce?

Who Gets the Retirement Account in a Divorce?

Asset division is one of the most common reasons for disputes during a divorce. If you want to make things a little easier, it’s helpful to understand how retirement accounts are divided during the process.

Are Retirement Accounts Joint or Separate Property?

During a divorce, the main question about any asset is whether it is personal property or marital property. If the retirement account is separate, personal property, then the original owner of it retains control. If the account is a marital asset, it and other types of joint property all have to be split up.

The basic rule for determining what counts as joint property is in part when the property was acquired. Accounts started after marriage are usually marital property. If the account was started before marriage but either spouse contributed money to the retirement account following marriage, a proportionate amount of the account becomes marital property.

A retirement account is usually only personal property if you quit adding funds once you got married. Some types of prenuptial arrangements can also mean that certain retirement accounts remain personal property regardless of whether money is contributed after marriage.

Different Types of Retirement Accounts Are Handled Differently

To figure out how to fairly split retirement accounts in a divorce, you need to pay close attention to the retirement account type. For a traditional IRA or 401(k), it is simple. There are some basic formulas your divorce lawyer can use to quickly estimate how much you contributed and how the property should be divided.

Things get more challenging with defined benefit plans like pensions. These involve an employer providing their employee with a certain amount of money at retirement, and the amount the employee gets is based on how long they work there. Since there is no way of knowing how long a person will continue to be an employee, your lawyer will have to just roughly estimate the value.

Strategies for Dividing Retirement Accounts Fairly

Whenever you are handling retirement accounts in divorce, it is a good idea to be flexible. For many couples, the simplest option is just agreeing that each party keeps all the funds of the retirement account in their name. However, this isn’t always a fair or possible option. Another common choice is offering a cash payment in exchange for complete control of an account. For defined benefit plans, the court along with the plan administrator will require a Qualified Domestic Relations Order. This allows the spouse who doesn’t own the plan to get a certain amount of the plan benefits.

It is also possible to divide the retirement account into two new retirement accounts that each contain a certain proportion of the funds. You could ask to retain control of a retirement account in exchange for other perks. For example, one spouse could take the retirement account while another takes the house. You could even negotiate a lower alimony payment in exchange for a retirement account.

How to Resolve Retirement Account Division Disputes

In an ideal world, you and your ex-partner would be able to quickly and easily find a mutually-satisfactory way to divide up retirement accounts. However, if you and your ex cannot come to a quick agreement on your own, your divorce lawyers can try negotiating. You can send offers and counter-offers to your ex that suggest different asset division strategies.

If this does not work, it might be time to get a neutral party involved. Many people are finding that a mediator can help settle disagreements in a mutually satisfactory way, or you can get a judge to divide the accounts in court. Though there is no guarantee that things will go in your favor, having a judge decide how to divide your retirement accounts can settle arguments once and for all.

Interested in learning more about retirement account division? The Law Office of Joanne Kleiner is here to help Montgomery County residents with their divorces. Call 215-886-1266 or send us a message to arrange a free consultation.

Dec 19

Is It Worth It to Fight for the Family Home?

What to Do With the Family Home in a Divorce

Pennsylvania homes have appreciated by nearly 4% in the past year, creating some tough decisions for divorcing couples. Specifically, people are faced with the choice to fight for the family home or leave it. Generally, you have three options: try to fight to keep the home; let your ex-spouse stay, and be paid for your share; or sell the home, and divide the proceeds.

Will the Court Allow You to Stay?

The first thing to think about is whether the court will actually allow a person to stay in the home. Usually, a judge will want to ensure that there is as little upheaval as possible for the children. If they are accustomed to living in the home, the court will not want to make them move. That would not be in the best interests of the children. Accordingly, the parent who has physical custody of the children will have the best chance of keeping the family home.

Can You Afford It?

Moreover, both ex-spouses need to think very hard about whether they can afford the family home on their own after the divorce is final. There is a major difference between affording the mortgage on one income rather than two. It may still be a stretch even if you are receiving child support. The last thing that you would want is to become “house poor,” spending a majority of your income on housing with little to spare for anything else. These days, the ability to refinance your home at a lower interest rate could help with being able to afford the home.

When you are getting divorced, you are also balancing your short-term financial needs and your long-term plan. Things like retirement planning often take a short-term break while you get your financial feet under you after the divorce. However, you should factor in things like whether and when you will be able to retire. If keeping the home comes at the expense of your financial future, you should think hard about whether it is what you want.

Decisions About the Home Can Get Contentious

In addition, fighting to keep the family home would necessarily involve the word “fight.” This means that your divorce can end up in a hostile place. If you have children and need to co-parent, this could pose a long-term complication to a relationship that you need to preserve. While this is not to say that you should automatically surrender to what your ex-spouse wants in the name of harmony, you should recognize that it will come at a cost.

Finally, you need to weigh the factors of wanting to maintain continuity versus being better off with a fresh start. Some people may benefit from moving somewhere else, especially if staying in the same place will consume them with unpleasant memories. However, others may want to stay where they are because there would be too many changes for them to process.

In your particular case, you need to decide what is best for your specific situation. The one unchanging factor is that you need to be honest with yourself and realistic, both in terms of what you can afford and whether you can agree with your ex-spouse. You have multiple options that you need to consider while working together with your divorce attorney. Deciding to fight to keep the house can be stressful if that is your preferred course of action.

Although it may require some maneuvering, there is a way that both individuals can keep the home together, even after the divorce, in a collaborative manner. Before you decide on one course of action, consult with your divorce lawyer about the strength of your claim and whether there are any other possible solutions. Keeping or giving up the home may not necessarily be an either/or proposition.

To learn more about this and other issues affecting your legal case, contact a Jenkintown, PA, divorce lawyer at the Law Office of Joanne Kleiner at (215) 886-1266.