Retirement Asset Division
Amongst the many assets which must be divided through equitable distribution, retirement assets can be amongst the most valuable and least understood. Even relatively simple company 401(k)s and personal IRAs can be require considerable effort to lawfully distribute between divorcing couples. In most cases, withdrawing from qualified or non-qualified retirement plans will result in significant early withdrawal penalties and/or tax implications. However, in the case of divorce, assets may be divided without incurring penalties if executed properly.
The retirement asset division attorneys of Jacobs Berger understand that the regulations and red tape surrounding many retirement assets can be downright confusing. We take pride in walking our clients through all aspects of the divorce process, including complex retirement asset division. Our divorce and family law attorneys take pride in providing personalized and compassionate legal services to our clients in New Jersey towns across Randolph, Madison, Morristown, Florham Park, Rockaway, and the greater Morris County region.
Call our office today for a confidential and comprehensive case assessment regarding any divorce property division concerns including dividing complex assets, high net-worth divorce, marital debt, and more.
Qualified Retirement Plan Asset Division Attorneys
At a high level, qualified retirement plans are “pre-tax” and non-qualified retirement plans are “after tax”. All retirement assets are taxed one way or another, but this distinction can have a major impact on the taxes of both parties when dividing retirement assets during a divorce. Our Madison qualified retirement plan asset division attorneys will seek a Qualified Domestic Relations Order or “QDRO” to avoid heavy tax penalties.
Qualified Domestic Relations Orders are court orders which allow qualified retirement assets to be split without incurring heavy taxes or early withdrawal penalties. For example, without a QDRO, withdrawing from a 401(k) would be taxed as normal income and you would be responsible for paying an additional ten (10) percent penalty. Examples of qualified retirement plans are:
- Traditional IRAs
- SIMPLE IRAs
- SEP IRAs
- 401(k) plans
- 403(b) plans
- Simplified Employee Pensions
Dividing Non-Qualified Retirement Assets
As mentioned above, non-qualified retirement assets are “after tax”. What this means is that contributions are not tax deferred, and all base investments are purchased with funds that have already been taxed. However, interest, dividends, long term capital gains, and short term capital gains are all taxable under federal law. While non-qualified plans do not carry the same tax benefits of qualified retirement plans, they are also subject to fewer federal restrictions including contribution caps and more freedom of asset choice.
In a divorce, our Morris County non-qualified retirement asset division attorneys may still recommend using a court ordered Non-Qualified Domestic Relations Order or “DRO” for tax and regulatory reasons. Examples of non-qualified retirement accounts include:
- Money Market Funds
- Savings Accounts
- Certificates of Deposits (CDs)
Asset Division Lawyers Discuss the Retirement Plan Division Process
In order to successfully divide your retirement assets, our Denville divorce asset division lawyers will need to work with you and identify your unique situation. In broad strokes, the process of retirement asset division may look something like this:
- Our legal team will work with you, your spouse, your spouse’s legal representative, and industry experts to valuate the retirement assets held in your marriage
- We will examine the exact nature of your assets and negotiate a fair and reasonable agreement between you and your spouse
- Our firm will work with your retirement plan provider to get the QDRO or DRO approved. This “pre-approval” step is not always necessary, but can be useful and will ease the process of approval from a judge
- Our asset division lawyers will draft and send a QDRO order to a family court judge for approval
- Once approved, the QDRO or DRO may become part of your divorce agreement and we will assist the execution of dividing the retirement assets
As you can see, the process of dividing retirement assets within a New Jersey divorce is relatively complex. Without the proper legal representation you could be left with less than that to which you are entitled, or be forced to pay heavy taxes and penalties. If your divorce includes retirement assets, lean on our experience to guide you through the legal ins and outs.
Contact our Retirement Asset Division Divorce Attorneys Today
At Jacobs and Berger, our divorce retirement asset division attorneys have extensive experience assisting clients going through divorce with lawfully and fairly dividing their qualified and non-qualified retirement plans. Our firm believes that a great legal team can take the stressful divorce process and make it much more manageable for our clients. Along those lines, we take pride in being accessible and open with our clients, responding in a timely and professional manner whenever we are needed. This dedication to dynamic and personalized legal service has allowed us to build a stellar reputation in local New Jersey communicates and all of Morris County.
Call our Morristown offices by dialing (973) 710-4366 or contact us online today for a confidential and comprehensive case analysis with a member of our qualified legal team regarding your division of retirement assets or any divorce or family law issues.