Dividing Retirement Assets and Pensions in a Florida Divorce

Divorce is already hard enough without adding financial uncertainty to the mix. Retirement accounts-401(k)s, IRAs, and pensions-often hold significant value, but splitting them isn’t as simple as withdrawing cash and writing a check. Florida law classifies these accounts as marital or non-marital property, then applies equitable distribution rules to determine a fair split. Without a clear plan, missteps can trigger penalties, unexpected taxes, or an unfair division of assets.

Marital vs. Non-Marital Retirement Assets

Not every dollar in a retirement account is subject to division. Florida law separates assets into marital and non-marital portions based on when they were earned.

• Marital Property: Any contributions (and investment growth) added to a retirement account from the date of marriage to the divorce filing date. These funds are subject to equitable distribution.
• Non-Marital Property: Funds contributed before the marriage or after the divorce filing. Growth on pre-marital contributions can remain separate if properly traced.

If an account existed before marriage, a financial expert may need to calculate what portion belongs to the original owner and what is marital property. The court will then divide the marital portion based on fairness, which may not always mean a 50/50 split.

Splitting 401(k)s and Employer-Sponsored Plans

A 401(k) or similar employer-sponsored retirement plan (such as a 403(b)) cannot simply be withdrawn and divided. Doing so without the proper process can result in hefty tax consequences and penalties. Instead, courts use a Qualified Domestic Relations Order (QDRO)-a legal document instructing the plan administrator to transfer funds to the other spouse.

If a QDRO is required but not done properly, the person dividing their 401(k) might face penalties, while the recipient could receive nothing.

Dividing IRAs (Traditional and Roth)

Unlike 401(k)s, IRAs don’t require a QDRO. Instead, a divorce decree or settlement agreement must clearly state how the funds should be divided. “Transfer Incident to Divorce” is the IRS-approved method for moving IRA assets between spouses without triggering taxes or penalties. If one spouse is awarded a portion of an IRA, the best practice is to ensure that the transfer is done directly from one account to another, rather than taking a cash distribution.

Handling Pensions in a Divorce

Pensions can be trickier to divide, as they involve future payments rather than lump sums. Florida courts look at whether the pension is vested or non-vested. Since pensions don’t always have an immediate cash value, they may be divided through:

• A QDRO or similar order directing future payments to be shared when benefits start.
• An actuarial valuation, where a financial expert calculates the pension’s present value, allowing one spouse to “buy out” the other with other assets.
• Deferred distribution, meaning payments are split only when the employee begins receiving benefits.

Because pensions require long-term planning, courts may retain jurisdiction to modify how they’re divided if circumstances change.

Additional Considerations in Dividing Retirement Assets

Beyond the type of account, Florida courts consider various factors in equitable distribution:

• Each spouse’s financial situation and ability to recover retirement savings post-divorce.
• Prenuptial or postnuptial agreements, which can dictate how retirement assets are split-if they’re legally valid.
• Asset offsets, where one spouse keeps the entire retirement account while the other receives assets of equal value (such as home equity).

Even a fair split can go wrong if handled incorrectly. Mistakes in drafting QDROs, IRA transfers, or pension valuations can result in delays, lost funds, or IRS penalties.

Get Legal Guidance Before Dividing Accounts

Dividing retirement assets in a Florida divorce is a legal and financial process that needs to be done correctly. Errors can lead to unnecessary taxes, penalties, or an unfair distribution. If you’re going through a divorce, make sure you protect your future. Contact Petkovich Law Firm at (305) 358-8003 for experienced guidance on equitable asset division.