Splitting Retirement Funds after a Tennessee Divorce

Dividing property after a Tennessee divorce, including retirement funds, can become messy. While many couples tend to think only about tangible items, such as homes, intangible property is just as important to consider. A divorce attorney in Memphis can help with the divorce process in Tennessee and ensure proper representation when deciding how to divide property like retirement funds in the divorce process.

Marital vs. Non-Marital Property               

Property that is considered non-marital is that which is owned by either spouse prior to getting married, and it is considered separate property. In other words, it can’t be divided between both parties during a divorce. Examples of this include real estate or other assets or items owned prior to the marriage.

Marital property, meanwhile, belongs to both partners, so it is subject to division when dividing the couple’s property during the divorce process. It doesn’t  necessarily mean all property is divided equally. In the case of a joint retirement fund, during divorce, it is usually divided in half if acquired during the marriage. Other examples of marital property include homes, cars and pensions acquired during marriage.

Factors Considered When Dividing Marital Property 

The following are some of the factors taken into consideration during the divorce process in Tennessee when dividing any type of marital property: 

• how long the marriage lasted;
• tax consequences;
• age of each person;
• financial circumstances of each spouse;
• mental/physical health of the partners;
• value of property;
• financial needs and liabilities; and
• each spouse’s contribution.

It’s important to note that fault in a divorce doesn’t  play a role in the division of marital property. It may, however, be considered when it comes to determining spousal support.

For more information, see Tennessee Property Division Divorce Laws & Factors | Answers to FAQs.

Tax Consequences and Retirement Funds in Divorce 

There could be tax penalties when receiving a portion of a retirement fund. Anything distributed prior to age 59 ½ is generally subject to a 10 percent tax, in addition to income tax.

But if the distribution is based on a divorce, the 10 percent penalty tax won’t apply. A Qualified Domestic Relations Order (QDRO) is needed to transfer the funds from one spouse to the other. However, there are still income tax ramifications.

One way around the tax withholding is to place the settlement into another retirement account immediately, such as another 401(k) or an IRA. The early distribution penalty will apply if the funds are taken out of the new retirement account at a later date prior to the individual turning 59 ½. If left there until the age of 59 ½, then the 10 percent tax penalty won’t apply. Keep in mind that there are still income tax ramifications whenever money is withdrawn.

A Divorce Attorney in Memphis Can Help with the Divorce Process 

Dividing financial assets and debt during a divorce can be complicated, sometimes requiring legal advice. A divorce attorney in Memphis at the Miles Mason Family Law Group can help protect your rights when dividing marital property such as retirement funds in the divorce process.