Individuals in Pennsylvania may not know that they need to complete certain paperwork in order to distribute retirement accounts as part of a divorce settlement. For an individual retirement account fund, a transfer incident is necessary. For an employer-sponsored plan or a 401(k), a Qualified Domestic Relations Order is necessary.
Individuals should also find out what tax obligations come with different accounts since traditional IRAs and 401(k)s and 401(b)s are funded through pre-tax contributions while Roth IRAs are funded after taxes. Another step is updating beneficiaries on retirement accounts.
Individuals have a choice regarding how the accounts are distributed. They can choose to roll their share over into an existing retirement account. They can also wait to take distributions until the owner of the account retires. Finally, they can cash out their share. Whatever they decide, if a couple can work together to come to an agreement on their own regarding dividing assets rather than turning to a court to do so, they may be happier with the result. It may also be quicker and cheaper.
An attorney can assist an individual who is negotiating with a spouse regarding division of assets or can help if the case goes to litigation. There may be a lot of flexibility in how couples decide to divide their shared property. For example, one might keep an account while another keeps real estate or collectibles. A prenuptial agreement may make the process smoother, or one individual might challenge the prenup. One individual may need to pay support to the other individual for a certain period of time. If the couple has children, it will also be necessary to work out how and whether custody is shared, whether child support will be paid and what kind of visitation rights the non-custodial parent will have.