Many people often express surprise at learning that their 401(k) accounts are subject to property division. Yet the court views contributions made to such a fund during a marriage as marital assets given that they come from marital income. This leaves those individuals facing the potential of having their 401(k) accounts divided, questioning how to best manage the process.
As people in Florida enter into their divorce proceedings, it benefits them to know what they may face in order to avoid having to reassess their strategies and goals midway through the process. One area that often presents the potential for unanticipated challenges is marital property division, specifically the division of retirement account assets.
Options for the non-contributing spouse
Often non-contributing spouses due to receive 40(k) funds question whether they can cash out their portions. Typically this would result in an early withdrawal penalty, yet according to CNBC.com, such an action during divorce proceedings does not result in penalties, however the non-contributing spouse will need to pay taxes on the portion cashed out .
During a divorce or upon the entry of a Final Judgment of Dissolution of marriage, the court may issue Qualified Domestic Relations Orders (QDRO). The QDRO permits a 401(k) plan provider to make a disbursement to a payee other than the account holder (in this case, the alternate payee would be the non-contributing spouse). This allows for the division of an original 401(k) account into two new accounts (with each spouse then having control over their respective accounts).
Can one keep their full 401(k)?
This is definitely an option but one partner must convince their soon-to-be ex-spouse to relinquish their stake in the account. This will likely require one foregoing their interest in another marital asset of comparable value in exchange.
Tampa Family Law Attorney
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If you are looking for a Tampa family law attorney, look to Anton Garcia Law, a 2021 and 2022 SuperLawyer “Best Attorney” award winner. Our office is located near beautiful downtown Tampa, where we proudly serve clients from around the state of Florida.