Those contemplating divorce in Georgia often have reason to worry about their finances and future opportunities. Divorce not only costs money but also typically affects the assets that someone holds. Those who have saved for retirement during their marriages may worry about what could become of their financial resources during a Georgia divorce, for example.
Particularly when people use specialized divorce savings accounts, like 401(k)s, they may worry about losing their retirement savings. Some people even feel trapped in unhealthy marriages because they do not want to divide what they have saved for retirement previously. Other times, they may worry that their spouse could keep everything because a 401(k) is in their name.
401(k)s may be marital property
Some couples plan ahead of time to preserve key resources by negotiating prenuptial or post-nuptial agreements. These special contracts may dictate what happens to certain assets if the couple eventually divorces. Unless there is an agreement imposing specific rules on the division of a 401(k), couples either settle property matters between themselves or take the matter to family court.
In either scenario, they usually need to declare contributions made to the account during the marriage as part of the marital estate. Even if the account is in the name of one spouse, both spouses probably have an interest in its value if they divorce. Spouses may worry about not just splitting the account but also losing some of the value of the account due to penalties and taxes.
Early withdrawals from a 401(k) can trigger income taxes and might also lead to a 10% penalty. Thankfully, that does not have to happen when dividing retirement accounts as part of a Georgia divorce. The lawyer of one of the spouses can draft a qualified domestic relations order (QDRO).
A properly executed QDRO can order the division of the account without leading to taxes and a 10% penalty. Each spouse can then retain a portion of the original account’s balance and can access those resources later when they reach retirement age.
Some couples can negotiate property division settlements in which one spouse keeps the 401(k) while the other receives other assets with significant value. Both accounting for the marital value of a 401(k) and actively dividing the account can lead to people fairly sharing the retirement savings accrued during a Georgia marriage.