Divorce among people over 50 has been trending upward since the 1990s. Older individuals in Minnesota likely have multiple retirement plans to split when they end their marriages. They could have one or more 401(k) plans and pensions from jobs over the years as well as Individual Retirement Accounts.
An owner of a financial services company confirmed that most retirement assets qualify as marital assets. This sometimes upsets people who had not realized that they would have to give a portion to an ex-spouse in a divorce settlement.
After people have made decisions about who gets how much, a special court order called a Qualified Domestic Relations Order will be needed for each pension or 401(k) plan. This order will direct plan administrators to distribute funds. Unless recipients roll their money directly into qualifying retirement savings plans, they could owe income taxes plus a 10 percent penalty if they are under a certain age. During negotiations about the division of a 401(k) plan, divorcing spouses should check to see if loans have been taken out of the plan.
Older individuals might also own life annuities, which could lose significant value if cashed out early. To preserve value, people will need to examine the annuity contract closely and consider trading assets to avoid cashing it out prematurely.
A divorcing individual, especially someone with a high income, may want legal representation when making decisions about a settlement. Information from an attorney might help someone understand how the divorce could influence Social Security benefits or an estate plan. An attorney may work to keep their client informed about rights to certain assets during settlement negotiations. If litigation becomes necessary, an attorney may be able to organize documentation to support the person’s position in court.