Most states in the country, including Florida, are equitable distribution states, meaning that assets acquired during marriage are considered marital property and divided equitably, or fairly, in a divorce. What many people do not realize is that marital assets include all contributions made to retirement funds during marriage, even though retirement accounts are typically held in one person’s name only.

Challenges of splitting retirement assets in a divorce

One challenge with dividing retirement assets is that they generally include separate property pre-marriage contributions. It can be difficult to analyze the performance of the retirement funds between the time of marriage and the time of divorce to assess which portion should be deemed marital property.

Dividing marital assets once their value is determined

Even after the value of a retirement fund is assessed, you need to be careful when withdrawing money, even to transfer it to the other spouse. As you probably know, 401(k)s have a 10% penalty for early withdrawal (before the age of 59 ½), but that penalty can be circumvented by having a judge enter a Qualified Domestic Relations Order. QDROs can also ensure that a spouse is actually able to access the other’s retirement funds by allowing funds to be transferred to the non-employee spouse’s retirement account or IRA. However, just because these funds can be transferred without penalty does not mean that they can be accessed and used without penalty. Assets taken from a 401(k) will still be subject to an early withdrawal tax penalty, plus regular income tax, if they are withdrawn by the non-employee spouse.

Retirement funds that do not require a QDRO

Some retirement funds can be divided without penalty even without a QDRO, such as an IRA. Additionally, QDROs are not needed for SEP funds, and they do not apply to military or government pensions. Whether or not you need a QDRO to transfer your own retirement assets or to get access to your spouse’s, it is a good idea to consult with a Florida-licensed family law attorney before agreeing to a division and distribution of any assets.