Going through a divorce is incredibly difficult for a variety of reasons. One of the most contentious parts of this process will be the division of assets. South Carolina operates under an equitable division rule, which means that property will be split between the two spouses in a way that is equitable. This division of property can be incredibly complicated when it comes to retirement accounts. Many people think that all retirement accounts are created equal when it comes to divorce, but this is not the case.
How are most retirement accounts divided in a divorce?
If you have retirement accounts and are going through a divorce, you will likely hear the term “Qualified Domestic Relations Order” (QDRO).
A QDRO will be used to manage the division of most retirement accounts that people may have. This includes 403(b) plans and other qualified plans, including a 401(k). When a QDRO is used, the assets will be divided between the owner of the plan and their current or former spouse, children, or other dependence. A QDRO is a tax-free transaction so long as it is reported correctly to the courts and the custodians of the plan.
An individual retirement account (IRA) will not be divided using a QDRO. An IRA will be divided using a process called a “transfer incident to divorce.” Using this type of transfer, no tax will be assessed on the separation transaction, and the movement of these funds can be classified as either a rollover by the IRA custodian or a transfer.
Regardless of what type of retirement account you have, it is important that they are divided properly in order for both parties to avoid significant tax consequences. In many cases, a divorcing couple has various types of retirement plans.
Our team is ready to help you through this
If you are going through a divorce and you know that you will need to split retirement accounts between you and your spouse, it is vital that you find an attorney who understands the various processes in place for splitting these assets. You can count on a qualified and experienced team standing by your side when you turn to the Elliott Frazier Law Firm. You can contact our Greenville divorce asset division attorney for a consultation today so we can plan your next steps forward together.
Angela Elliot Frazier is a Family Law Attorney who practices in Greenville, SC. She graduated from the University of South Carolina School of Law, and has been practicing law for 14 years now. Angela Frazier believes in helping you through one of the most stressful times of your life. Learn more about her experience by clicking here.