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How Do I Make Sure I Stay On Top of My Investments During My Divorce?


As attorneys dedicated to helping individuals successfully work through divorce, one common question that we receive is how to ensure that any financial fallout is minimized, especially for couples obtaining a divorce later in life–i.e. after the age of 50–when they have usually accumulated significant retirement assets. Below, we discuss several tips to consider in keeping control over your assets during divorce:

Change Your Beneficiary Designations

First and foremost, make sure that you update your beneficiary designations, otherwise, your spouse will likely be the beneficiary on your investment accounts. Also make sure that, if you have not been involved in the family finances, you obtain the information you need to access all of your assets, including investment accounts. This not only includes basic account information, but how they are set up, how to place a hold on withdrawals, etc.

Consider All Penalty & Tax Consequences

When it comes to making major decisions concerning your assets, also make sure that you consider any potential penalty and tax consequences. Some assets, such as annuities, can come with penalties if you exit early, for example. In addition, you will likely want to consider the status of the marketplace before unloading certain assets that depend upon it, and early withdrawal from a number of retirement accounts can often carry penalties.

Know That the Process Depends Upon the Type of Investment or Retirement Account

Indeed, when it comes to splitting up assets, the procedure very much depends upon the type of investment account. For example, for brokerage accounts you co-own with your spouse, the relevant financial institution will require a letter requesting that the joint account be closed and new separate accounts opened in each person’s name.

When it comes to 401(k) plans, for example, you and your attorney will need to supply the court with a Qualified Domestic Relations Order (QDRO). What happens to the account depends upon the plan administrator: While some allow the spouse (of the employee) to open their own account, others will require that it be rolled over into an IRA.

Conversely, when it comes to splitting up IRAs, QDROs are not used. Instead, the divorce agreement is submitted to the IRA custodian who then rolls the separated funds into a new IRA in order to avoid taxes from being incurred. Keep in mind that while distributions from a plan pursuant to a QDRO are exempt from the 10 percent early distribution penalty, these exemptions do not apply to IRAs, therefore, once that they are rolled over into a new IRA, any funds taken out before you reach age 59 ½ are subject to a withdrawal penalty.

If you have any concerns about an account you co-own with your spouse—i.e. that they may take certain actions with respect to that account—you and your attorney can request that the financial institution place a hold on that account until you can reach an agreement as to the division of assets. A number of couples also end up including very specific instructions in their divorce settlement as to what will happen to retirement accounts precisely because things can get complicated, and the procedure and rules that need to be followed very much depend upon what type of account you are dealing with. On top of that, you also have to take potential tax consequences into account as you are figuring out what to do with these accounts.

Contact The Right Florida Divorce Attorney

When it comes to figuring out financial assets during divorce, obtaining advice from a qualified family law attorney is key. Not all assets are created equal; for example, many often have different tax consequences (for example, a Roth account versus a traditional 401k). Contact our Orlando divorce attorneys at Greater Orlando Family Law today to find out about our guidance when it comes to investments and divorce.




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