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Divorce, marital property and retirement benefits

Having the right strategy for property division at the end of a marriage could significantly improve an individual's financial security as a divorcee. People going through the divorce process, especially those 50 and older, may want to consider any retirement assets of a spouse during negotiations. In Georgia and most states, marital property is divided equitably in a divorce by a judge who presides over the settlement agreement according to the National Endowment for Financial Education.

With some exceptions like inheritances and gifts, most assets obtained by a couple while married are considered marital property. Retirement benefits can be a better option than other assets because of the opportunities they can offer for increased growth. A home, on the other hand, will most likely require maintenance and could depreciate in value over time. Additionally, retirement benefits awarded in a divorce can be used to pay for the legal fees accrued during the process. However, many financial advisers would not recommend that course of action. It should also be noted that those 59 ½ and younger have the option of making a one-time, tax-free withdrawal from either a 401(k) or 403(b).

According to a survey conducted by Securian Financial Group, 31 percent of 546 respondents, all of whom were married longer than 10 years before divorcing, did not claim a portion of their ex's retirement benefits because they did not know they could. However, retirements funds accumulated prior to a marriage are not considered marital property.

Someone who is both beginning a divorce and aware of a spouse's retirement benefits may want to retain a divorce attorney who could draft a qualified domestic relations order on his or her behalf. That document, in theory, allows splitting couples to avoid paying taxes on transfers of retirement funds.

Source: Forbes, "The Big Money Mistake Divorcing Women Make", Kerry Hannon , July 03, 2014

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