A Divorce is an especially trying and emotional time for anyone. Unfortunately, for those with significant or substantial financial assets, the process is even more confusing and potentially stressful.
As a Raleigh divorce attorney, I see firsthand the effects that divorce can have on the financial well-being of a couple, especially those older folks who are nearing retirement age.
Unlike the smiling, happy couples with silver hair depicted on the glossy retirement brochures, the truth is that more and more folks over the age of 50 find themselves dealing with a divorce.
And since very few people ever plan or prepare for divorce, the challenges and emotional stress mount when couples begin to negotiate the distribution of the family assets.
This can be especially trying when the discussion turns to retirement accounts held in one or both of the spouses' names.
Laws differ from state to state, so if you are considering a divorce, it is important to understand how assets are treated in North Carolina during a settlement.
Whether it's a pension, a 401K, an IRA or other financial instrument, you'll want to consult with both your financial planner and a tax professional prior to finalizing your divorce or settlement agreement. Many people make the mistake of not seeking a tax professional’s advice and end up paying for that dearly down the road.
For the most part, North Carolina considers all property acquired during the marriage to be "marital property" and therefore subject to equitable distribution, meaning "you get half and I get half." This includes everything from real estate to investments to actual physical property.
Generally, any property acquired prior to the marriage is considered individual property, owned 100% by that spouse. There are exceptions to this if the property has active increases in value that occur during the marriage (such as investing in new stock or remodeling and home).
When it comes to retirement accounts, it can get complicated… and fast.
And it really does get complicated, especially as the greater the number and bigger the amount of assets are obtained. In the case of a simple self-funded 401K account, determining the amount to be equally distributed between the two may appear relatively straightforward.
However, there are a number of important considerations to evaluate.
For example, do employer contributions affect the value of each partner's distribution?
Or, how do you truly value the marital portion of a pension plan where one spouse worked at the business prior to the marriage and continues to do so now?
Obviously, the courts have encountered some of these problems and we have adapted some formulas/theories on calculations to help alleviate the issue. But as financial instruments grow more complex and retirement values may not be so easy to define, a good financial plan is necessary for anyone going through a divorce.
Consider also that there could be tax consequences should assets be liquidated in order to satisfy a divorce settlement. Timing of such strategies could be costly without proper guidance.
Add it all up and divorce can be financially messy, if not downright devastating.
An experienced family law attorney with Kurtz & Blum can help you navigate the complicated steps of obtaining the proper paperwork, asset valuations, financial statements and other documents needed to keep your financial house in order during and after a divorce.
We provide an objective, non-emotional view of your current situation and help you focus on making the best decisions that could impact your well-being for many years.
Give us a call today at 919-832-7700 and let's discuss the best steps to take now and help you keep your financial sanity during this trying time.
Does Divorce Derail Retirement? Forbes.com July 24, 2017