What Happens to Your Retirement Account in a Nevada Divorce?
For many people, a retirement account is their most significant financial asset other than their home. Spouses often express concern about what happens to assets accumulated in a retirement account if a married couple divorces. In this discussion, Las Vegas family law attorney Joseph Gersten explains how your and your spouse’s retirement accounts factor into the property settlement in a Nevada divorce.
Nevada Community Property Laws
Nevada is a community property state. That means all property and assets acquired by either spouse during the marriage belong equally to both spouses. If a couple gets a divorce, all community property is divided between the spouses, often (but not always) in equal shares. For more detailed information about property division in a divorce, please read our blog post, Do You Get Half of Your Spouse’s Property in a Nevada Divorce?
All types of retirement and pension plans are subject to the Nevada community property law. They are treated the same as other financial and bank accounts. It doesn’t matter what type of plan the spouse has. Employer benefit plans, IRAs, 401(k)s, and SEPs are all subject to Nevada’s community property laws. Your retirement account is community property, generally to the extent of contributions and increase in value during a marriage. Making a precise analysis in that regard can be complex.
There is one exception to the general rules regarding division of a retirement account in a divorce. If the spouses have a prenuptial agreement or a postnuptial agreement that excludes a retirement account from division in the event of divorce, the provisions of the agreement protect those assets from division.
Dividing a Retirement Account in a Divorce
Division of retirement accounts applies to both spouses in a divorce. In the absence of a valid prenuptial or postnuptial agreement relating to retirement accounts, each spouse has the right to the community property portion of all retirement accounts owned by the other spouse.
In some situations, it may be possible to avoid dividing a retirement account. After the value of the account is determined, the spouses may agree to offset the community property entitlement from the retirement account with other property or assets to avoid dividing the retirement account. This type of offset must be carefully analyzed and considered from both long-term and short-term perspectives on behalf of each spouse before utilizing it.
Issues with retirement accounts are one reason why it is important to have an experienced divorce and property settlement attorney assist with your divorce. Negotiations over community property can work out in any number of different ways. Sometimes, there are alternatives to dividing your retirement account. Your lawyer ensures that the terms of your property settlement are as favorable to you as possible under the circumstances, including treatment of your retirement funds and your spouse’s retirement accounts.
If a retirement account must be divided, accomplishing the division is complicated, because of the laws that apply to retirement and pension accounts. The proper method of division depends on the type of retirement account. If you or your spouse attempt to divide a retirement account without professional help, you can easily create substantial tax liability, resulting in depletion of your assets.
Qualified Domestic Retirement Order / QDRO
A Qualified Domestic Retirement Order, commonly called a QDRO, is a court order issued by the judge in a divorce case. The order assigns ownership of some or all benefits in a retirement plan to another person, which may include the plan owner’s spouse (or former spouse) or a child or other dependent. It directs the retirement plan administrator to accomplish the payments in accordance with tax laws and the terms of the QDRO.
A QDRO is necessary for any employer-sponsored retirement or pension plan governed by the Employee Retirement Income Security Act (ERISA). Those plans include union pensions, defined contribution plans like 401(k)s, defined benefit plans, and public employee retirement plans. IRAs and SEPs do not require a QDRO, but must be divided in accordance with specifically applicable tax laws to avoid financial penalties.
Typically, the QDRO court process is separate from the divorce proceeding. The QDRO is not part of the divorce decree but is a different court order. A QDRO must contain specific information to be complete and proper. Generally, legal counsel for a spouse submits a recommended order for the court’s consideration.
Regardless of what type of retirement account you or your spouse own, it is essential to get assistance from an experienced family law attorney regarding treatment of retirement accounts in the property settlement aspect of a divorce. There may be viable options for avoiding division of a retirement account that could be explored as part of the property settlement negotiation process.
Schedule a Free Consultation With an Experienced Las Vegas Divorce & Property Settlement Divorce Attorney
Respected Las Vegas family law attorney Joseph Gersten assists clients with property settlement and asset division issues, including community property rights in retirement accounts, as well as all other concerns that arise in Clark County divorce cases. Attorney Gersten’s investigative background and trial experience are especially important in gathering evidence, negotiating with opposing counsel, and presenting information to the court, which can make all the difference in how the judge decides the issues in a divorce case.
At The Gersten Law Firm, your initial consultation is always free. We assist clients in Las Vegas, Henderson, and throughout Clark County with all types of family and domestic matters. Call 702.857.8777 or complete our online form to schedule an appointment.