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Where do retirement funds fit into a divorce settlement?

Setting up retirement accounts is a great way to ensure one is prepared for the future. However, nothing in life is certain, and that money may end up not being there as planned. Divorce can quickly change how much a person has in his or her retirement account. Even though many individuals in Maryland may want to think those funds are off limits when it comes to divorce settlements, that simply is not the case.

When working through a divorce, just about all financial assets are up for grabs. There are, of course, certain exceptions to this. For example, if money is in a trust, is not considered to be marital property or is protected by a prenuptial agreement, it may truly be off limits. For most couples, money placed in retirement accounts is often considered shared property. This does not mean that is is automatically disbursed in the event of divorce, however.

There is actually quite a bit that goes into splitting a retirement savings account. For instance, the type of account will determine how it can be divided and what distribution options are available. Along with figuring out distribution options, tax implications must also be considered. If not done so properly, the early distribution of assets, even for divorce purposes, can have serious tax consequences.

At the end of the day, divorcing spouses may have the right to collect portions of retirement accounts; however, this is something that should be carefully thought through and planned before completing. In some cases, it may not prove to be in one's best interests. In others, filing to collect is the best move for one's financial future. Those facing these issues in Maryland can seek legal counsel when working through the division of financial assets in order to determine if including retirement accounts in their divorce settlements is the best move.

Source: Fox Business, "Who Gets the Retirement Accounts in a Divorce?", AJ Smith, Nov. 17, 2015

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