People preparing for divorce in Connecticut often understand that the end of a marriage will lead to certain financial setbacks. They will have to share their resources with their spouse and take responsibility for a reasonable share of marital debts.
The idea of dividing certain assets can make people feel anxious, particularly if they are far into their careers. For example, splitting up retirement accounts can make people very nervous, as they will rely on what they have set aside while working to ensure their financial stability later in life.
Savings acquired during the marriage are subject to division
Many professionals start saving for retirement long before they get married. They may need to go over their financial records carefully to determine how much of the retirement account is marital property and how much is technically separate property that they do not need to share with their spouse. Any amounts added to the account during the marriage, including employer-matching contributions, are likely part of the pool of marital property. However, the contributions to the account from before the marriage are probably separate assets that people do not need to share with their spouses.
Thoughtful division strategies can prevent penalties and taxes
Some people are able to negotiate property division settlements that preserve retirement savings and do not require their division. They simply use the value of the marital portion of the account to balance other decisions related to marital assets and debts. Other people will actually need to split the account.
Typically, retirement savings accounts are subject to both taxes and penalties if people withdraw a portion of their balance before reaching retirement age. Thankfully, those dividing a retirement account in accordance with the property division order can avoid the 10% penalty and taxes that would likely diminish their retirement savings.
So long as people have a property division order and utilize a qualified domestic relations order, they can divide their retirement accounts without taking a major loss in addition to reducing the balance by sharing some of it with their spouse. As a result, seeking legal guidance and learning more about the rules that govern property division can help people feel more confident about their financial future as they prepare for divorce in Connecticut.