NJ Forensic Accountant Explains Retirement Benefits in a Divorce

Video Transcript 

My name's Robert Bonavito, New Jersey Forensic Accountant. This video is part of a series of videos where I discuss forensic accounting topics for educational purposes only. If this was a litigated matter, I would take a different approach, have different conclusions, based on different facts and circumstances.

Hi, I'm Robert Bonavito, New Jersey Forensic Accountant. Today's topic is going to be retirement benefits in a divorce. When you're getting divorced, your second biggest asset usually is...sometimes the first, well, I guess it could be the first, most times. It's usually your house and then retirement benefits, or retirement benefits and your house. And you know, there's some confusion, like, well, if I get divorced, how do we split up the retirement benefits?

Well, what we do in a divorce is, first, we do a forensic accounting to determine what kind of benefits there are, retirement benefits, 401(k)s, Roth IRAs, annuities, define...We go in and we do an analysis, and figure out what's out there, qualified stock, everything. And then what we do is we actually contact the people who control these assets, we provide evaluation of the assets as of the date of complaint.

And generally what happens is, like, if you have an IRA or a Roth, it's basically split down the middle. If it's worth a million dollars, you get half, you know, your spouse gets half. But if you have a defined benefit plan and let's say you're 50 years old, you're gonna retire when you're 60, we don't know what your benefit is gonna be because it's based on how many hours, and how long you worked, when you retire.

Pretty complicated, but what we do is it's called if and when. So we say, "Okay," you know, we split up the Roth, we split up the IRA, we split up the annuities, and we have this defined benefit plan that your spouse is gonna get some time in the future, and you're entitled to 50% of that. So we say, if and when your spouse retires, you get half of it, okay? And this is put in the divorce decree and, you know, the attorneys do their legal stuff, and make sure that when your spouse does retire, you get half of it.

But the other thing is, they will file what's called a qualified domestic relations order, and what that enables you to do is to split up all these retirement funds tax-free, so there's no tax consequences. And that has to be done right again, so you know, us working with your lawyers will make sure that there's no tax, there's nothing done inappropriately. And, you know, if you transfer the IRA into your name, you make sure you don't take the money and handle it personally for more than 30 days, or, you know, you basically roll it over into another IRA in your name, and then there'll be no tax consequences.

So you know, take a good look at the...We've had people get divorced where there's been, you know, 10 or 12 separate retirement funds because they've been with different companies, and things change, so you really gotta make sure everything's captured. Like I said, we do forensic accounting, we do evaluation, and we do a projected retirement analysis to show what you get, when.

My name's Robert Bonavito. If you have any questions on this video, please feel free to email me.