When people in New York get divorced, they will have to divide their marital assets. The assets will be divided by the court in a fair and equitable manner. The types of property that are considered to be marital property include all of the assets that either spouse has accumulated during the marriage, including retirement savings held in 401(k) accounts IRAs, and other retirement savings vehicles.
The division of retirement accounts must be done properly to avoid potential tax liability. People cannot simply withdraw the amounts from their retirement accounts. If they do, they may face early withdrawal penalties. Instead, the division of retirement accounts must be completed with a qualified domestic relations order. This is an order from the court telling the administrator of the retirement plan the percentage that should be withdrawn from the account holder’s account and transferred to the other spouse.
If a QDRO is not drafted, the amounts that are withdrawn may be subject to taxes. With a QDRO, the amounts that the recipient spouse will receive can be rolled over into a new account set up in the recipient’s name without being taxed. If the original account holder is under the age of 59 1/2, the distribution under a QDRO to his or her ex-spouse will not incur an early withdrawal penalty that he or she might otherwise face.
Depending on the size of an estate and the length of a marriage before a divorce, property division can be highly complex. People who have accumulated substantial assets, including retirement accounts and other assets, may benefit by consulting with experienced divorce attorneys. A family law attorney who is experienced in handling high-asset divorces might help his or her clients to divide marital assets in such a way that helps them to avoid negative tax consequences.
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