Divorce at Altitude: A Podcast on Colorado Family Law

Dividing Retirement Accounts in A Divorce | Episode 69

November 22, 2021 Ryan Kalamaya & Amy Goscha Season 1 Episode 69
Divorce at Altitude: A Podcast on Colorado Family Law
Dividing Retirement Accounts in A Divorce | Episode 69
Show Notes Transcript

Ryan Kalamaya explains what happens to retirement accounts in a divorce in Colorado.

What is Divorce at Altitude? 

Ryan Kalamaya and Amy Goscha provide tips and recommendations on issues related to divorce, separation, and co-parenting in Colorado. Ryan and Amy are the founding partners of an innovative and ambitious law firm, Kalamaya | Goscha, that pushes the boundaries to discover new frontiers in family law, personal injuries, and criminal defense in Colorado. 

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Ryan Kalamaya (1s):
Welcome to Divorce at Altitude, a podcast on Colorado family law. I'm Ryan Kalamaya each week, along with my business partner and cohost Amy Gosha or an expert, we discuss a particular topic related divorce or co parenting in Colorado. In addition, we have created a short series of lessons that will take you through the legal process of divorce and answer your questions from simple to complex divorce. Isn't easy. The end of a marriage, especially when children are involved, brings a great deal of loss and change. We hope these practical tips and insights will help you on your journey to a new and better life.

Ryan Kalamaya (42s):
This episode is about retirement accounts and how they're divided in a Colorado divorce. Now next to real estate in the marital residence, retirement savings are often some of the most important or valuable pieces of property in a divorce that needs to be divided. This episode is more of an overview of retirement and divorce in subsequent episodes. I'll dive into say IRAs versus 401ks in discuss why those really matter. But for now, one thing you need to keep in mind is that taxes really can make retirement accounts tricky when you're dealing with it in a collared divorce. Here's an example. If we go back to Eric and Melanie Wolfe are hypothetical divorced couple, and Eric has $500,000 in savings in his 401k, for example, but then he also has $500,000 in the bank.

Ryan Kalamaya (1m 33s):
Those two assets are not really treated or seen as the same. And the reason is because of taxes. If Melanie were to get $500,000 of the 401k and then withdraw that money, it's going to be taxed. On the other hand, that $500,000 in the bank is not taxed. So typically what divorce attorneys do is we will look at the retirement accounts and we will divide those accounts separately as a different asset class. Another thing to keep in mind is that retirement accounts frequently will contain separate property and that is premarital savings. So if Eric was working for some sort of software company and contributing to his 401k before he met and married Melanie, that would theoretically be separate property.

Ryan Kalamaya (2m 23s):
Now it gets really tricky when you deal with appreciation on that pre-marital savings amount. And then there's another issue in that that is the Eric might really be challenged to, or struggle to find the account statement showing how much he had when they got married. Another thing to keep in mind is that there are special rules for defined benefit or qualified plans that would be for 401ks pensions. We'll get into that in that separate episode, but you should understand that a qualified domestic relations order is going to be necessary. And that's often drafted by a special attorney, another tip or issue that frequently comes up with retirement.

Ryan Kalamaya (3m 3s):
And this is a problem that even divorce attorneys sometimes miss. And that is, are you dealing with percentages or are you dealing with particular numbers? Because retirement accounts can often go up and down in value. So are you dealing with a 60, 40 or a 50 50 split on a particular account or are you talking about $252,838? And that might be 50% on a particular day. Those are questions that you need to ask yourself. Finally, one thing I should mention as well is that as a reminder, that social security benefits are not divided in a divorce. So keep that in mind because social security is a form of retirement savings and it can be considered as quote an economic circumstance, but it's not going to be divided.

Ryan Kalamaya (3m 49s):
There are also special rules regarding entitlement to the other spouse's social security. But for now that hopefully is helpful for you to understand how retirement accounts are treated in a Colorado divorce. Thanks for listening or watching this short lesson on the divorce ALS Altitude podcast. You found this helpful. Please leave a review or share with a friend. It does help for others that are going through or thinking about a divorce in Colorado. If you want to find out more information, please visit Kalamaya.law or divorceataltitude.com. That's kalamaya.law. Remember, this is educational information.

Ryan Kalamaya (4m 28s):
It's not intended to be legal advice. Please consult with an attorney about particulars of your case. We're happy to answer questions. Feel free to give us a call at nine seven three one five two three six five.