Dividing Retirement Plans During A Late-Life Divorce
Late life divorces are increasing in number as more and more people live longer. A recent study has revealed that one in every four divorces are late-life divorces. Like any divorce, a late-life divorce can be hard hitting on the financial front. But a late-life divorce could ruin people with the best retirement plans.
The cost of living separately is much higher than the cost of living together as the number of accommodations and facilities double. In simpler words, an elderly couple that have been together for a long period of time would have likely planned their retirement together. When a divorce is filed, one of the spouses will have to move out and more often than not, have to plan separate occasions to meet other family members. All of this, could drive expenses up by 30 or 40 percent.
Anyone involved in a divorce will tell you that it is one of the most expensive scenarios to deal with. For people aged 50 or over, this could spell the destruction of their financial plan altogether. A financial planner or advisor needs to be consulted in order to understand the circumstances. This is especially true, if one of the spouses handled the finances throughout the marriage.
In some cases, retirement benefits might be more valuable than all of the couple’s other community property combined. This might form conflict on the division of the benefits. Some forms of benefits such as social security, military compensation, and workers’ compensation for disability are not considered to be community property and will remain with the individual after divorce.
Retirement Allocations
In California, retirement is considered to be community property that can be divided amongst both spouses. However, retirement divisions are handled outside of the usual divorce proceedings. A Qualified Domestic Relations Order (QDRO) outlines the division of the retirement funds. It is usually filed after the divorce judgment. The QDRO is needed to divide 401k, 403b, profit-sharing plans, tax sheltered annuities and other aspects.
During divorce proceedings, the QDRO calls for the equal division of retirement assets. However, mediation and negotiation can help spouses agree on different rates or division percentages. The QDRO is the final indicator of division of retirement benefits. Divorce attorneys often hire QDRO specialists to help segregation and division. Once both parties have agreed on the division of benefits, a QDRO is filed.
To learn more about the divorce process in California and how mediation can help, please visit our page, What is Divorce Mediation.
Gerald A. Maggio is a trained Orange County divorce mediator who has amicably resolved cases many cases out of court, as well as an experienced divorce and family law attorney. Mr. Maggio founded California Divorce Mediators in 2012 with the belief that although “not every marriage can be saved, every family can” and a mission to save families from the financial and emotional distress associated with traditional divorce litigation. California Divorce Mediators is located in Irvine, California, and serves the Orange County area and other counties in California offering divorce mediation, child custody mediation and mediation of other family law matters.
