How To Handle Retirement Accounts and Pensions in a Kentucky Divorce
After a divorce, the division of assets becomes a crucial matter, especially for those wanting to secure a comfortable life post-divorce. However, when a marriage lasts for many years, the commingling of finances between spouses makes it challenging to envision a fair division of assets. More importantly, couples need to also understand that retirement assets may be subject to this division, something many people overlook.
In the blog below, we will review the Kentucky laws governing the division of retirement accounts and pensions to help you better understand what a divorce can mean for your investments.
What Is Marital Property in Kentucky?
Marital property in Kentucky refers to all the assets and possessions acquired by either spouse during the marriage, excluding gifts, inheritance, and damages obtained through legal action. This includes real estate, personal property, financial assets, and any other items of value.
When a divorce occurs, the division of marital property is subject to state laws, which outline the process for equitable distribution. In Kentucky, equitable distribution entails a fair and just allocation of marital assets, taking into account each spouse’s specific circumstances and needs at the time of divorce. This may involve considering factors such as the duration of the marriage, the financial contributions of each spouse, as well as any other relevant considerations to ensure an equitable division of assets.
What Happens To Pensions and Retirement Assets During a Divorce?
Pensions and retirement assets accumulated during a marriage are generally regarded as joint marital property and are subject to equitable division between spouses in the event of a divorce. However, any pensions or retirement assets earned before the marriage are typically not classified as marital assets and are not subject to division during a divorce settlement.
That is why individuals going through a divorce must thoroughly understand the specifics of their pension plans and retirement assets before agreeing to any terms related to their distribution.
What To Consider When Dividing Retirement and Pension Accounts?
In the event of a divorce, whether it be uncontested or collaborative, it is imperative that all assets and liabilities belonging to the couple are accurately documented and that marital property is equitably divided. This encompasses a thorough evaluation and division of pensions and retirement accounts. In addition, although the divorce courts have the authority to mandate the division of these assets, it is also important to note that the retirement pension or plan administrator will also provide specific orders. For instance, when it comes to retirement plans, each provider has their own specific requirements and standard paperwork, known as a Qualified Domestic Relations Order (QDRO).
Qualified Domestic Relations Order
A Qualified Domestic Relations Order is a legal document that establishes the right of an alternate payee to receive all or a portion of the benefits payable under a retirement plan. It is critical for dividing retirement assets in the event of a divorce.
A QDRO is necessary for each retirement account involved and must comply with the specific plan’s requirements and the guidelines set forth by the plan administrator. The QDRO should also outline the details of the division, such as the percentage or specific dollar amount to be allocated to the alternate payee, as well as any conditions or restrictions that may apply. Furthermore, the QDRO needs to be carefully drafted and accurately reflect the divorcing parties’ intentions to avoid potential future complications.
Learn More About Dividing Property in a Divorce, Contact Hoffman Walker & Knauf Today
If you are considering filing for divorce and want to know more about how retirement accounts and pensions will be handled during this process, contact Hoffman Walker & Knauf today and speak with one of our knowledgeable divorce attorneys.
