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Splitting retirement and investment accounts in a divorce

On Behalf of | Mar 8, 2019 | High Asset Divorce

Not only can a Wisconsin divorce be emotionally taxing, but it can also hit all your retirement and investment accounts hard. As a result, it is crucial that each soon-to-be-ex leaves the marriage with some retirement savings. At Law Offices of Benske, Gatzke, McFadden and Rose, we often represent clients going through a high-asset or complex divorce.

According to FINRA, dividing assets can be time-consuming and tedious. There are several guidelines that regulate how you may split retirement and investment accounts so they have only your name or your spouse’s. In many cases, the assets must rollover to an IRA. While it may be tempting to liquidate your investments, it may not be worth it if you incur significant tax penalties. Annuities often have steep costs for early exits.

The type of account often dictates the division method. For regular brokerage accounts, a letter to the financial institution from you and your spouse may be enough to close the joint account and open separate accounts. The letter must detail the allocation of the existing assets. Some insurance products and proprietary investment funds are not transferrable, which may be an issue if one of you wishes to use a different brokerage firm. There is a similar process for IRAs.

To split a 401(k), the plan administrator must receive a Qualified Domestic Relations Order from the court. The asset division depends on the administrator’s guidelines. In some cases, a non-employee spouse can open their own account within the plan; in others, they may require a rollover into an IRA. Another option may include the non-employee spouse taking a penalty-free distribution.

Once the asset split is complete, it is important to update beneficiaries. Removing your ex, adding a new spouse or naming other loved ones can ensure they receive your estate in the manner you wish. Visit our webpage for more information on this topic.