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Addressing a 401(k) in a financially complex Ohio divorce

Some Ohio divorce processes are very simple. Spouses may only own a few shared resources and may have a very easy time negotiating property division terms. Other times, couples preparing for divorce have complex marital estates. Resources ranging from executive compensation packages and real property to retirement savings can lead to disputes between the spouses.

Assets that have a greater impact on someone’s economic circumstances often become focal points during property division discussions. 401(k)s and other tax-deferred retirement savings accounts, like Roth IRAs, can often provoke emotional reactions in people preparing for divorce.

How can those who have fastidiously saved for retirement during a marriage effectively address a 401(k) during their divorce negotiations?

By establishing the marital portion of the account

Some people mistakenly assume that their retirement savings should remain their separate property when they divorce in Ohio. They may reference how they started the account before they got married or the fact that they are the only account holder as proof that the account is not subject to division. However, deposits made into a retirement savings account during the marriage are typically subject to division in the event of a divorce.

Unless someone protected their retirement account as part of a prenuptial agreement, the amounts added to the account during the marriage are likely subject to division when the owner divorces. An in-depth review of the account can help determine how much of its balance is part of the marital estate and how much remains the separate property of one spouse.

By accounting for or dividing the savings

There are two main approaches to handling 401(k)s and similar accounts during a divorce. In some cases, people establish the value of the account and then factor that into other property division decisions.

It is possible for one person to retain the account if the other spouse receives assets of comparable value in the divorce settlement. The other approach involves the decision to actually divide the retirement savings account. Provided that the spouses divide the account according to the specifications of an Ohio property division order using the right document, they can avoid the 10% penalty and taxes that could be due for prematurely withdrawing funds.

The closer someone is to retirement age, the more difficult giving up a portion of their retirement savings may be. Understanding what happens during the property division process in Ohio may help people feel more comfortable as they address their resources in anticipation of a financially complex divorce.


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