When you first decide that you’re going to divorce your spouse, there are many questions that come to your mind. While you may be familiar with bigger issues like child custody, smaller issues like retirement accounts may not have crossed your mind until now. As part of ensuring that each party leaves the divorce in a financially sound fashion, both partners’ retirement accounts need to be split up according to Wisconsin divorce laws.
The type of retirement plan matters
There are various different types of retirement accounts that people can hold. For example, one partner may have an IRA account while the other has a 401(k) account. Since each one of these accounts has different rules regarding ownership and withdrawing money from the account, different rules are applied to the accounts in the event of splitting the asset for divorce.
When splitting up your retirement accounts, the court will provide various orders as a form of instructions for the account transfer. When dealing with IRA accounts, you’ll receive a Transfer Incident to Divorce document. In the event of other types of non-IRA retirement accounts like a 401(k), you’ll receive a Qualified Domestic Relations Order. Both of these orders give instructions to the account furnisher to split the asset according to the terms of your divorce settlement without letting creditors have access to the funds or taxing the funds.
Consider alternative options
Splitting up retirement accounts can be difficult, to say the least. One way you can avoid doing this is by using an alternative form of settlement. For example, say that you have a large retirement account and your spouse does not. Instead of splitting up your retirement account, you and your former spouse may agree to give you one of the larger marital debts that you owe. By taking sole responsibility for the larger marital debt, it helps to offset the large amount of your retirement account.
Getting a divorce is no easy task. There are many questions that come to mind, including how to split up your retirement accounts. It’s always advisable that you contact a lawyer at the start of the divorce process. A legal professional may answer all of your questions and help with the actual proceedings to ensure that they’re done correctly.