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A Voice Of Reason During The Turmoil Of  Family Law Disputes

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Divorce doesn’t have to ruin your savings and retirement plans

On Behalf of | Oct 6, 2023 | Property Division |

People generally don’t know what the future holds after they have declared their intention to divorce. Only those with carefully drafted and legally viable marital agreements will be able to predict the outcome of property division with 100% accuracy. Even those who are somewhat familiar with California’s community property rules recognize that there are many variables in play during a divorce.

Those preparing for divorce, especially those with limited personal resources despite being in a high-asset marriage, may worry about what the future holds. People often worry about their plans for the future, particularly their long-term savings goals and their retirement plans. Thankfully, divorce does not necessarily need to derail someone’s long-term financial efforts.

Not all property is subject to division

One of the first concerns people have about savings and retirement funds in a California divorce is that they will have to divide all of those resources in half. They may have an oversimplified idea of what community property statutes mean for their finances.

Some people worry that not only will they reduce their savings by half but they may have penalties as well if they used tax-deferred accounts for their retirement funds. Thankfully, when people divide their resources as part of a divorce in California, they can avoid penalties and taxes and many cases.

A properly executed qualified domestic relations order (QDRO) can split a retirement account without triggering the taxes and penalties someone would need to pay if they made an early withdrawal to pay for a new car or a medical bill.

Alternative dispute resolution gives people control

To many people, simply avoiding penalties isn’t sufficient. They hope to retain particular assets for their own financial comfort after the divorce. Obtaining those specific resources may be a viable option for those who can cooperate with their spouses.

Collaborative divorce or even divorce mediation may allow spouses to separate in a manner that gives them control over the property division decree. Equally important is the ability to manage the costs of divorce with a more amicable approach. Spouses may pay a fraction of what they usually would for a contested divorce if they use alternative dispute resolution systems to settle their disagreements about property division and other marital matters. They can preserve more of their savings by cooperating.

Those in unhappy marriages do not need to give up on the idea of divorce just to preserve their retirement savings and financial resources. Setting specific financial goals early in the divorce process may help people preserve more of their most important assets for the future.


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John T. Chamberlin, Attorney at Law
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