When a marriage ends, Colorado residents must decide what to do with assets acquired during the marriage before they can finalize the divorce and move on. According to a recent article, twice as many couples 50 and over divorced in 2010 compared to 1990. As more older adults are choosing divorce, retirement accounts and Social Security are becoming an asset that people cannot afford to ignore. However, many people do not realize that retirement accounts in a spouse's name could still be included in a division of marital assets.
Seeking a share of retirement accounts might be wiser than pursuing other assets for various reasons. Retirement accounts tend to grow over time while the value of the real estate and other property may be subject to change. In addition, by using a Qualified Domestic Relations Order, someone can receive a portion of a former spouse's retirement account transferred into his or her name without being taxed for the transaction. Alimony, on the other hand, is subject to income taxes and is typically seen as a short-term solution. Therefore, experts recommend not giving up a claim to retirement benefits in exchange for spousal support or the marital home.
Another overlooked source of income is to start receiving some of a former spouse's Social Security benefits and delay taking their own until later, and that person's benefits are not affected by the cash-out. In addition, the spouse who delayed their benefits may get up to an eight percent increase for each year past the full retirement age they wait. Generally, the marriage must have lasted 10 years and meet other requirements.
While the specifics of property division may be confusing, the rewards from doing it wisely might mean the difference between long-term financial security and short-term satisfaction. An attorney could help seek a QDRO and draft additional legal documents necessary to ensure the proper transfer of assets.
Source: Forbes, "The Big Money Mistake Divorcing Women Make", Kerry Hannon, July 03, 2014
Tags: Divorce, alimony, property division, spousal support
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