38 - Dividing up Retirement Accounts the Right Way in a Divorce with Matt Lundy
Oct 12, 2017
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Matt Lundy, an expert in dividing retirement accounts in divorce cases, discusses the importance of properly dividing retirement assets post-divorce. He emphasizes the misconceptions, tax advantages, and complexities involved in dividing 401ks, IRAs, and pension plans. The podcast covers the intricacies of navigating retirement account division across states, managing court processes, and ensuring clear agreements to avoid complications.
Understanding nuances of dividing retirement plans is crucial in divorce settlements.
Clear valuation dates and descriptions are vital for smooth division of federal retirement accounts.
Deep dives
Retirement Account Division in Divorce Cases
Retirement accounts, often overlooked before divorce, become significant assets during the process. Understanding the nuances of dividing retirement plans, like 401ks and pensions, is crucial. A common formula used is the coverture fraction to determine the marital portion, offering protection to current plan participants' future earnings. Processing fees by plan administrators must also be factored in negotiations to avoid unnecessary conflicts.
Federal Government Retirement Plans Division
Federal government retirement plans, such as annuities and Thrift Savings Plans (TSP), are subject to division through specific orders. While TSP orders are swiftly handled by a dedicated unit, annuities' processing through the Office of Personnel Management can be slow. Clear valuation dates and descriptions are vital to smooth the division process of these federal retirement accounts.
Complexities of Pension Division in Divorce Cases
Pensions, similar to social security in structure, present unique challenges during divorce due to their defined benefit nature. Survivor benefits, cost-of-living adjustments, and early retirement bonuses must be clearly addressed in divorce settlements to ensure equitable division. Understanding the coverture fraction and separating shared portions are key steps in pension plan division.
Military Retirement Account Division
Recent Supreme Court decisions impact military retirement division in divorce cases, requiring a reevaluation of existing processes. While further analysis is needed to navigate the changes effectively, seeking expert guidance, like from specialized military law attorneys, is recommended to stay compliant and informed. Stay tuned for more detailed insights on this evolving terrain.
In this show, we are going to get into a topic that people tend to ignore a bit, or take for granted. They set it and forget it. What I am talking about is retirement accounts. Most people set up a 401k or are part of a pension plan, but do not pay that close attention to it after setting it up. Then, when we get to a divorce, they just assume it will be divided and do not pay attention to the details. This is partly because they were in the habit of doing that while they were married. They just had the money taken out of their paycheck and then did not think much about it afterwards. When they pause on this issue, however, the gravity of the situation starts to sink in. Often the retirement accounts are the largest or 2nd largest asset in the marriage, depending on how much equity is in the marital home. Sometimes people panic because they think they are going to have to liquidate part of their retirement account to divide it up. Fortunately, that is not the case. Joining Leh and David is Matt Lundy, Esq. He has dedicated his law practice to focus almost exclusively on dividing retirement assets in divorces. He is licensed in multiple states and helps hundreds of people a year properly divide their retirement accounts after a divorce.
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