How to protect your 401K in a divorce

Divorce proceedings are as much a financial upheaval as an emotional one, and money may be at the forefront of your mind during this time. Even if it isn’t a concern, it is wise to protect your assets as much as possible in a divorce to ensure a healthy future for yourself and your family.

How do I protect my 401K?

It is a common concern among those undergoing divorce proceedings. A prenuptial agreement in place before tying-the-knot is the ideal situation. Unfortunately, it is not the case for many people.

A prenuptial agreement is a legally binding agreement that is set in place prior to getting married. It is a practical solution to deciding what assets are to be considered “separate property” in the event of a separation, and which are “marital property” to be divided up during the divorce proceedings. You can cite your 401K in this agreement as “separate property.”

If you don’t have a prenuptial agreement, though, your 401K will be considered part of the marital assets and divided accordingly. The best way to protect it following the initiation of divorce proceedings is to stop making voluntary contributions to it as soon as possible.

TIP: The law varies among states as to when you are legally allowed to stop making contributions, so you will need to check with a local divorce attorney before taking action.

Another possibility is to investigate whether state law allows you to exclude any contributions you made to your 401K before you married from the divorce settlement. The laws vary on this between jurisdictions, and you will need to consult a local divorce attorney for a clearer picture.

Outside of these possibilities, it is likely that your attorney will draft a QDRO (Qualified Domestic Relations Order) and send it to the divorce court. Once signed by a judge and accepted by the plan administrator, the division of assets will become official and can be enforced.

Typically, the judge will deem any post-marital contributions and subsequent earnings as a result of these contributions, to be marital assets, and divided as such. The QDRO will give you the option to roll over your portion into your own plan, however, penalty-free and tax-free. 

Know your plan

Each plan comes with its own rules and stipulations. Where some divide earnings by percentage, others divide them by shares. Some plans allow you to pay out your ex-spouse’s portion at the time of divorce, where others may require you to wait until retirement to draw on the funds.

You are the best person to research your plan. It may seem like a lengthy and arduous task, but you can be assured that you have your own best interests at heart.

Whatever your individual plan specifies, it is more than likely that your spouse will be entitled to a portion of your 401K in the absence of a prenuptial agreement. There are a few common settlement options available, including:

  • Keeping your 401K and giving your spouse alternative marital assets of comparable value.
  • Splitting the 401K assets between you and your spouse.
  • Liquidating the portion of your account that meets the QDRO and agreeing on a lump sum settlement with your spouse. 

These tips are a brief overview of the options that may be available to you. The best way to obtain a complete picture in your unique situation is to consult with a local, knowledgeable divorce attorney regarding your 401K. Do some background research yourself as to what your particular plan permits to give yourself better insight into the situation.

For more advice and state-specific information, contact one of our professional divorce attorneys today.

How to talk to kids about divorce

For any couple with children, the decision to file for divorce holds extra gravity. Concerns about how your child will cope will more than likely be at the forefront of your mind. The situation will be life-changing for everybody involved, and a turning point in the lives of your children.

Children are incredibly resourceful and adaptable, though. If the situation is handled correctly, they can navigate their way through the upheaval and come out of it in a good place. The role you play in guiding your children through the divorce process is pivotal in ensuring a healthy emotional outcome for them.

While each situation is vastly different, there are a few tips that are considered good practice when it comes to telling your kids about the divorce.

Tips for speaking to your kids about divorce

1. It’s not about them

The most important thing you can do is make sure your kids know that the divorce is not about them. You can’t reiterate enough how both parents still love them. Children will need reminding of this affirmation regularly throughout the process and into the future.

2. Choose your timing

Kids can have varying responses depending on how the news is delivered. It helps if you’re in a position where you can both sit down with your child and deliver the news together. It gives the impression that, although you may be separated as a couple, you are still united in your role as their primary caregivers.

3. Discuss the practicalities

Unexpected changes and uncertainty about the future can be the primary source of anxiety for kids. Taking the time to go through the practicalities of how their lives will change might ease their worries considerably and afford them peace of mind.

Discuss the living arrangements, how often they’ll get to see both their parents, the holiday season, birthdays, schooling, and so on. Encourage them to ask questions now and in the future.

4. Ask for their input

Offering them the chance to give their opinion and feedback will give back a sense of control in a potentially overwhelming situation.

5. Avoid any ugly details

Don’t talk badly about the other parent, play the victim, or say anything that may indicate to your child that you want them to take sides. The middleman position can have devastating effects on their wellbeing and ability to cope, both short-term and long-term.

Children love both their parents, and they must be allowed to continue a healthy and progressive relationship with each one over the years.

6. Open communication

Highlight that open communication is vital and that it’s okay for them not be okay. Communication is always important for a healthy family unit, but in adverse situations such as divorce, it’s essential.

7. Let them be children

Remember, children are not mini grown-ups, and they won’t communicate in the same way you would expect of an adult. Lengthy discussions and complex planning will not engage them. It may even cause them further anxiety.

Keep chats short, informal, and child-led. Allow them the space to change the subject if they need to and read between the lines. Sometimes kids communicate their feelings better with art or activity than words.

8. Know what’s normal and what isn’t

Each child will react differently. You know your child better than anybody, and you know what reactions are normal for them and which ones need more attention.

Some children may scream, shout, or act out. Others may internalize things and appear quieter than usual. There may be other cues to emotional distress, such as bed wetting, night terrors, sleepwalking, or reports of behavioral changes with their peers in-school or creche.

For advice and consultation in a time where positive support is crucial, contact one of our experienced divorce lawyers today.

How to Find a Divorce Lawyer

The decision to file for divorce is not one that is made lightly. A momentous life decision such as this is often followed by the question, “What do I do next?” The process of filing for divorce can seem daunting, costly, and intimidating to pursue.

Finding the right divorce lawyer for your situation can have a massive positive impact on a potentially tedious situation. In addition to the psychological benefits of having professional guidance, the right divorce lawyer can also save you significant amounts of time and money.

How do I start looking for a divorce lawyer?

Start by asking friends and family

The prospect of speaking to friends and family may seem overwhelming at first. Talking about your personal life aloud to your loved ones often makes the situation feel more “real” and inevitable. While it may seem challenging in the beginning, voicing your concerns with those who care about you can only help your situation.

Seeking any word-of-mouth recommendations for divorce lawyers from people you trust can put you on the right path to expert professional advice and guidance. In contrast, a trial-and-error approach can prove costly and time-consuming.

Know your budget

It’s important not to overspend on an already potentially expensive process by incurring unplanned expenses along the way. It’s a better idea to discuss rates with any potential lawyers over the phone before in-person consultations, for example. This proactivity avoids any awkwardness or wasted time from either party if the lawyer happens to be outside of your price range.

Know what you want before you go in

There are various options available when choosing to separate from your spouse, including mediation, collaborative divorce, litigation, and more. Some options more cost-effective and less time-consuming than others, and they may be the right approach for you. It depends on your requirements and the intended outcome for the divorce.

It’s important to know what your goal is before you begin the process. Keep in mind the factors you have to consider, such as child-care and the dissolution of assets. Knowing this information ahead of any consultation will help keep you focused, less emotional, and better equipped to make a correct assessment of any divorce lawyer.

Any reliable divorce lawyer will be able to talk you through your options with a client-centered approach. They should be responsive to your needs and answer all your questions unambiguously.

Interview potential lawyers

You are hiring them to do a job, so now is the time to ask questions. Seek clarification, confirm their rates, and discuss their track record. Don’t be afraid to look for more information, and never feel pressurized into hiring the first divorce lawyer you encounter.

It’s also a good idea to research three or four potential candidates before you commit. Take the time to meet with them in person and get a sense of how they operate.

Observe them

Many divorce lawyers will offer a free first consultation to give you both the chance to get to know each other. Use this time to assess how your potential lawyer behaves during the meeting.

Are they attentive and client-centered, or distracted, pushy, and aggressive? Do you feel like they’re listening to your needs? Are they behaving professionally and courteously?

Call the Professionals

Your first consultation is your opportunity to observe how they are likely to operate on a daily basis. It can be far more revealing and honest than any advertising jargon. Above all, trust your gut.

Do you like the lawyer? Do you feel comfortable around them? Do you feel capable of their abilities, and does their professional approach match your intended outcomes?

For a divorce lawyer that you can trust, visit one of our seasoned professionals and get to know us a little better—no strings attached. Call us for a free first consultation today.