The process of preparing for divorce is lengthy and often quite complex. Even couples who commit to cooperating with each other and comporting themselves with dignity may struggle to cooperate when emotions run high. Custody issues are often a trigger for emotional conflict, but financial issues can also lead to disputes between divorcing spouses.
Those who recognize the issues that could complicate their divorce proceedings can potentially take steps to reduce the conflict that arises during their divorces. Assets that are important for someone’s long-term financial stability can be difficult for people to calmly and rationally address during divorce negotiations.
A retirement account, for example, may represent years of economic sacrifices throughout someone’s career. They accept a lower standard of living during their prime earning years to set some of their income aside for later in life. What typically happens with retirement funds during Pennsylvania divorces?
Spouses may need to share their savings
The average divorcing couple in Pennsylvania can anticipate the inclusion of some of their retirement savings in the pool of marital property. In Pennsylvania, either the spouses or a judge have to review the marital estate to find an equitable or fair way to divide the property and debts that belong to the spouses.
Any contributions to the retirement savings accounts of the spouses during the marriage could be at risk of division. Contributions made prior to marriage may not be vulnerable during a divorce. Once spouses calculate the marital portion of the retirement account, they can then talk about ways to share that with one another or allocate other assets as a way of offsetting the value of the retirement account.
It should be noted that any increase in value during the marriage of the pre-marital portion of a retirement account is also marital property. And, if there are no post-separation contributions to the pre-marital portion during the marriage, then market increases and decreases on the premarital account may be included until day of distribution. This, however, does not include the premarital portion.
If the spouses do decide to divide the account, it is possible to do that without incurring a financial penalty. A qualified domestic relations order (QDRO) can lead to the penalty-free division of a retirement account that might otherwise be subject to a fee for early withdrawals and tax consequences.
Those who understand the Pennsylvania approach to property division can potentially navigate negotiations more effectively because they understand what they have to share and divide. Preparing for divorce often requires a thorough financial review and learning about Pennsylvania statutes with the assistance of a skilled legal team.
