Divorces have many complications, and they get more so as you age because you start accumulating assets. One of these asset classes is your retirement accounts and pensions.
Unfortunately, Florida law divides retirement accounts and pensions based on equity during a divorce. This is what you need to know about the equitable distribution process.
If you started your retirement accounts or earned a pension while you were still single, these funds and their increased value and dividends are yours. They are not subject to division during a divorce. This is the same concept as any other property or assets you acquired before you got married.
Every penny that you invest during your marriage is subject to Florida’s asset division laws. However, this division is equitable, not equal. This is a key distinction because retirement distributions have penalties and taxes, reducing their value. Therefore, a $500,000 house is actually worth more than a $500,000 retirement account.
Valuation is a key process when you are working with any type of investment account. You need to understand exactly what penalties and taxes your accounts may experience to now and in the future. Your pension’s payout plan, whether it is a single-life payout, joint-life payout or lump-sum payment, can impact its valuation, so check with your plan provider. Then, use this valuation when you negotiate your distribution.
Equitable division has a few exceptions. First, if you have a pre- or postnuptial agreement that separates your retirement accounts, they are not negotiable during your divorce. In addition, any federal pensions you receive are not divisible.
As you negotiate, stay open to alternatives, such as life insurance policies that are equal to your pension.