Divorce American Style—Important milestones

Divorce is painful for most of us no matter the duration of the marriage.  It probably doesn't occur to you to think about it, but it should-because how long you were married may affect how your State's Divorce Court considers alimony and other issues.

Knowing what your state considers a “long duration” marriage will affect the payout of alimony.  Interestingly, in New York, no spousal support is usually ordered until the couple has been married for at least twenty years. While in California and Texas the duration of your marriage is 10 years. If you have been married for a shorter duration, then any alimony payout will usually be calculated over a much shorter time period.

How about splitting retirement accounts? Many couples know that the spouse usually gets a payout from the other person's retirement account. However, I have found that most don’t realize that the payout doesn't have to go directly to the spouse in their name-but can go into a retirement account in their name, savings on taxes.  You accomplish this with a court ordered QDRO, which will allow the payout to be made directly into the recipient’s retirement account.

This is true of a pension plan as well.  Usually there is no distribution from a Defined Benefit Pension Plan until that person retires.  However, the spouse is eligible for a portion of that payout.  You also need the QDRO and it needs to be recorded with the Defined Benefit Pension Plan.  With a Defined Contribution Pension Plan, usually known as a 401k, there can be a court-ordered QDRO which will allow for a tax-free distribution to the recipient’s retirement account.

As with most things, these decisions are based on your state’s divorce and tax laws, so always seek the advice of your financial team. At Berson Money Management, your financial team usually consists of your attorney, CPA, and advisor. Often it will include your mortgage broker, insurance broker, and banker so that your team is working for you on all of your financial needs.

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