As you begin the process of dividing your property in a divorce, your first inclination may be to do so based on sentimentality and emotional attachments. While most people do this at the start, it’s important that you put aside those criteria for property division since they won’t serve you in the future.
It may help to remember that you are attempting to create yourself a future with some financial security. Keeping this in mind may be most important when dealing with what most Kentucky couples would consider their largest assets: the retirement accounts and the marital home.
What to do with your retirement accounts
Building a nest egg for your later years may have been a priority for you and your future ex-spouse during the marriage. Now that you are divorcing, that asset will more than likely be subject to division. How you divide these accounts depends on the type of retirement account you have. Most people have either an employer-sponsored retirement account or an IRA. Dividing each requires the following:
- In order to divide a pension plan, a 401(k), a 403(b) or some other workplace retirement plan, you will need a qualified domestic relations order to avoid incurring any tax penalties.
- In order to divide a traditional or Roth IRA, you will need to submit a “transfer incident to a divorce” form, along with a copy of your divorce decree.
These transfer documents need to be correct in order for them to do their jobs. Not only do the forms have to meet with current law, but they also need to meet with the requirements of the retirement plan or IRA. It isn’t as simple as filling out a form or obtaining a QDRO.
What to do with the marital home
Dividing a retirement account may seem simple compared to dividing the family home, since you can’t exactly cut a house in half. Instead, you have two basic choices:
- One of you can keep the house, but that would probably entail refinancing the mortgage and buying out the other party’s interest in the home. This requires a great deal of financial commitment that the party wanting to keep the home may not be able to meet.
- You could sell the house and divide any proceeds. You will need to factor in the time it will take to sell the home and where you will live while it’s on the market.
Before making any decisions regarding the marital home, you may want to explore all of the options, along with the pros and cons associated with each choice.