Your Rights to Retirement Assets
During the property division in a Tennessee divorce, the divorcing couples must distribute their retirement assets, including pension plans and 401(k), between both parties equitably and fairly. However, evaluating and dividing retirement assets can pose different complexities due to the tax and legal implications.
According to a 2016 survey by the American Academy of Matrimonial Lawyers, retirement accounts and pensions (62%) are among the three contentious matters in a divorce. A knowledgeable Tennessee family law attorney can help you understand the rules regarding the division of assets and your rights to retirement savings in your divorce.
At the Law Offices of Fisher Wise, I have devoted my career to offering outstanding legal services and guiding clients through the complexities of divorce proceedings.
Using my comprehensive legal understanding, I will attempt to fight for your best interests and outline an effective strategy to protect your retirement benefits. My firm proudly serves clients across Chattanooga, Soddy-Daisy, Red Bank, East Ridge, Bradley County, Bledsoe County, Sequatchie County, Marion County, Rhea County, and Hamilton County, Tennessee.
Marital Property or Separate
Property Law in Tennessee
During a Tennessee divorce, the property owned by couples is either separate property or marital property. Under Tennessee law, separate property or non-marital property includes:
All real and personal property is owned by one spouse before the marriage
Property acquired by one spouse in exchange for property acquired before the marriage
Income from and appreciation of property owned by a spouse before marriage
Damages recovered from personal injury claims
Property acquired by a spouse as personal gifts, third-party inheritance, devise, or descent
Property acquired by a spouse after a legal separation order
Conversely, marital property includes all real and personal property – tangible or intangible – acquired by either or both spouses during the marriage. For example, marital property can be the house, cars, royalties, furniture pieces, income, rents, bank accounts, stocks, credit card charges, pension plans, 401(k) accounts, and other assets acquired during the marriage.
Equitable Division of Marital Property
Additionally, Tennessee is an "equitable distribution" state. This means that the couple's marital assets must be divided equitably and fairly. To achieve equitable property distribution, the following is considered:
The duration or length of the marriage
The age, mental and physical health of each spouse
Each spouse's estate, vocational skills, earning capacity, employability, financial needs, and financial liabilities
The economic circumstances of each spouse at the time of the asset division
The value of each spouse's separate property
The relative ability of each party for future acquisitions of capital assets and income
The tangible or intangible contribution by one spouse to the training, education, or increased earning power of the other spouse
Each spouse's contribution to the acquisition, appreciation, preservation, or dissipation of the marital or separate property
The amount of Social Security benefits available to each spouse, and
The estate of each spouse at the time of the marriage
The tax consequences to each spouse
Any other factor is deemed necessary to achieve an equitable division of assets.
An experienced asset division attorney can guide you through the property division process and enlighten you about how it might affect your retirement savings.
How Retirement Assets Factor In
Furthermore, the distribution rules which will apply for the division of retirement benefits in a divorce usually depend on the types of retirement plans. The various types of retirement assets include:
Traditional retirement plans, such as IRA, 401(k), and annuities
Any amount that the couples have stashed away in the retirement accounts during the marriage, including employer-sponsored retirement plans, is presumed to be part of the marital property. Unless there is an existing premarital agreement (prenup) that states otherwise, both spouses are legally entitled to part of the retirement balance. Your attorney can help you petition a Qualified Domestic Relations Order (QDRO) to protect your share of the retirement benefits.
Relations Order (QDRO)
A Qualified Domestic Relations Order (QDRO) can be described as a court order stating how the retirement benefits will be shared between the spouses. Once the Tennessee court determines the actual balance available in the retirement accounts, your lawyer can draft a QDRO. The order can help you achieve the following:
Instruct the retirement plan administrator to pay you your share of the retirement benefits.
Prevent your spouse from withdrawing the funds in the retirement accounts.
Prevent your spouse's employer from paying out the retirement benefits to your spouse directly.
Penalize your spouse for withdrawing the funds in the retirement plan.
A knowledgeable divorce attorney can help you draft the Qualified Domestic Relations Order and help you understand the tax implications of dividing retirement benefits.
Tax Implications of
Dividing Retirement Assets
Usually, retirement transfers are tax-free. However, early distribution of your retirement savings – dividing the retirement benefits before reaching the retirement age – may attract a 10% penalty fee. The available option to avoid the withdrawal fee is to distribute the retirement benefits according to the provisions of the divorce order. Therefore, it is crucial that you speak with a knowledgeable family law or tax attorney for proper guidance and to help you make intelligent decisions in your divorce.
How an Experienced
Attorney Can Help You
Retirement assets and savings are among the most valuable assets many people own. However, just because your divorce order states so doesn't mean your rights to retirement assets are covered. Getting a QDRO is crucial to protect your retirement benefits and penalize the other spouse from trying to withdraw or transfer the benefits. An experienced family law attorney can explore your available legal options and determine the best course of action.
At the Law Offices of Fisher Wise, I have the resources, diligence, and skill to assist and guide individuals and families in divorce-related matters, including property division and retirement assets. Additionally, I will work diligently with both spouses to help settle other divorce or property division matters peacefully and help you move forward quickly.
Contact my firm – the Law Offices of Fisher Wise – today to schedule a one-on-one consultation with a knowledgeable asset division attorney. I have the detailed legal counsel and reliable advocacy you need to navigate essential divorce decisions effectively. My firm proudly serves clients across Chattanooga, Soddy-Daisy, Red Bank, East Ridge, Bradley County, Sequatchie County, Marion County, Rhea County, Bledsoe County, and Hamilton County, Tennessee.