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Division of Pensions, IRAs and 401(k)s in Indianapolis

Division of pensions, IRAs, and 401(k)s is among the most highly contested aspects of divorce. Retirement assets may represent a significant portion of the net worth of many couples. If a division is not performed properly, it can lead to serious tax consequences and penalties.

At Trapp Law, LLC in Indianapolis, IN, we have significant experience handling property division in divorce, including pensions, IRAs, and 401(k)s. Our family law lawyers in Indianapolis understand the sensitive nature of divorce and finances and provide high quality, affordable legal services. You are invited to meet with us in a free and confidential initial consultation. Contact us for knowledgeable representation in a divorce involving pensions, IRAs, or 401(k)s.

Is a Pension, IRA, or 401(k) Split Down the Middle in an Indiana Divorce?

As a general rule in Indiana, all property acquired before or during the marriage is split 50/50 between the spouses in a divorce. However, this does not necessarily mean that your spouse will get half of your pension, IRA, or 401(k). There are other ways to arrive at an equitable division of property without splitting retirement assets down the middle.

When Should Retirement Assets Be Split Down the Middle?

In some cases, splitting retirement assets may be the best or only option for dividing property in a divorce. An example would be a long-term marriage in which one spouse has never worked and the couple has no other assets equal in value to the working spouse’s retirement plan.

What Are the Alternatives to Splitting a Pension, IRA, or 401(k) with Your Spouse?

In many cases, an alternative approach may be in the best interests of both spouses. For example, if both spouses have retirement accounts of comparable value, it may be best for each spouse to retain his or her individual retirement account, instead of splitting both accounts 50/50.

Another option is to negotiate a resolution in which the spouse with the retirement account gives up another asset of comparable value. This could be real estate or non-retirement investments. In this case, the other spouse would agree to accept another asset in place of half of the retirement account.

Why Splitting Retirements Assets in a Divorce So Complicated?

Property distribution is a complicated aspect of divorce, and high-value retirement assets are often a subject of dispute. Divorcing spouses face unique challenges concerning valuation, the timing of distributions, tax consequences, and other issues related to retirement. It is critical to strategically address these issues and their long-term consequences when dividing property in a divorce.

Accessing a Spouse’s Retirement Plan after Divorce

If the court has ordered that you are entitled to a portion of your spouse’s workplace retirement plan, you will need a qualified domestic relations order (QDRO) to access the funds. A QDRO is separate from and based on the final divorce decree. You will need a QDRO for either a pension plan or a 401(k).

What Do You Need to Consider During Divorce?

Everything. Marital property can constitute many things, including pensions, IRAs, and 401(k)s. If you obtained your retirement account or pension before the marriage, you may have some recourse. But if you built your retirement account after the marriage, it’s simply assumed that your spouse had some contribution—even if it was not a financial or documented contribution.
Who Gets the 401(k) During the Divorce Process?

Your spouse could get part or even all of your 401(k) during the divorce process; it really depends. Assets are split up in a way that is fair and equitable. If you want a house (valued at $400k) you might trade in a 401(k) that’s valued similarly. Otherwise, it may be split up or split down the middle. It depends on what you and your spouse contributed during the marriage and the situation your spouse will be in after the marriage.

On the other side, if your spouse has a 401(k) and has been contributing to it and you have been a home-maker or otherwise not able to contribute to your own, you should be aware that you are entitled to part of it.

How Do I Protect My 401(k) in a Divorce?

When you divorce, it’s up to you to determine what you value. While prenuptial agreements can be drafted, if these agreements are considered materially unfair in a considerable way, they will often be thrown out entirely. You can protect any assets that you acquired before your marriage by documenting it thoroughly. Often, it can be best to create a new retirement account entirely when you get married.

But if you want to protect a 401(k) that you contributed to during your marriage, you may be out of luck. The bottom line is that a marriage is a legal partnership. It’s assumed that your spouse was contributing in some way to your 401(k); for instance, by buying groceries, they made it possible for you to contribute more.

Can I Cash Out My 401(k) Before Divorce?

You should never move any funds around without consulting your lawyer. Cashing out your 401(k) before a divorce isn’t going to help. Even your cash is considered marital funds. The court frowns heavily upon those who try to hide funds during a divorce. You will likely be found liable for the amount and need to recover it.
Cashing out your 401(k) is only going to make the court process more complex, as it really doesn’t change who owns the money. Likewise, avoid liquidating any stocks and bonds, transferring any large amounts of money, or emptying any joint accounts. Even though they are joint accounts, that doesn’t mean you are solely entitled to the money.

Why Choose Us for Property Division Involving Pensions, IRAs, and 401(k)s?

Our family law attorneys at Trapp Law, LLC have experience handling divorces involving pensions, IRAs, and 401(k)s. We take a collaborative approach to resolving divorce disputes to find workable solutions that satisfy the needs of both parties. However, we are fully prepared to protect your best interests in hearings or at trial. We understand that no two cases are the same and develop creative and custom solutions for every client. Contact us today!

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"This was the most traumatic time in my life. After 27 years of marriage I was in total shock when my, now ex, husband delivered the blow. I thought my world had ended but Angie made sure that didn't happen. She fought hard for me and got me a very good settlement. I couldn't have been more pleased."

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