Divorce is a complex and emotional process, and it can have a significant impact on your retirement savings if you’re not careful. Retirement assets are considered part of the marital property in Wisconsin, meaning they are subject to division in the divorce settlement. Here’s what you need to know about protecting your retirement during divorce in Wisconsin.
Understand Wisconsin’s Marital Property Laws
Wisconsin is a community property state, which means that all marital property, assets, and debts are divided equally between the two spouses in a divorce. This includes retirement accounts, such as 401(k)s, IRAs, and pensions.
Marital property is defined as all property acquired during the marriage with a few exceptions. If one spouse brought property into the marriage or inherited property during the marriage, it may be considered separate property and not subject to division.
Take Inventory of Your Retirement Assets
The first step in protecting your retirement during divorce is to take an inventory of your retirement accounts and gather documentation to support their value. This includes account statements and tax returns, as well as any pension plan documents.
Make sure you know the type of retirement account you have, whether it’s a defined benefit plan or a defined contribution plan, and how it’s valued. This information will be important when it comes time to divide your retirement assets.
Consider a QDRO
A Qualified Domestic Relations Order (QDRO) is a court-ordered document that allows for the division of retirement assets in a divorce. A QDRO is required for most types of retirement accounts, including pensions and 401(k)s.
A QDRO establishes the legal right of an alternate payee, typically the former spouse, to receive a portion of the retirement benefits. It also specifies how the benefits are to be divided and how they will be paid out. A QDRO must be approved by the plan administrator and the court before it becomes effective.
Negotiate a Fair Settlement
Dividing retirement assets can be a complicated process, and it’s important to seek the advice of an experienced divorce attorney. They can help you negotiate a fair settlement that takes into account all of your retirement assets and any tax implications.
In some cases, it may be possible to trade assets in order to preserve retirement savings. For example, one spouse may keep the retirement account while the other spouse keeps the family home.
Protect Your Retirement After the Divorce
Once your divorce is finalized, it’s important to take steps to protect your retirement assets. If you received a portion of your former spouse’s retirement assets, make sure you roll them over into your own retirement account to avoid tax penalties.
It’s also important to review your retirement savings plan and make adjustments if necessary. You may need to increase your contributions or adjust your investment strategy to make up for any retirement savings that were divided in the divorce.
Conclusion
Divorce is a difficult and emotional process, but it’s important to protect your financial future, including your retirement savings. By understanding Wisconsin’s marital property laws, taking inventory of your retirement assets, considering a QDRO, negotiating a fair settlement, and protecting your retirement after the divorce, you can ensure that your retirement savings are protected during this challenging time.