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Avoiding a common financial mistake during divorce

Married couples often put money into a retirement for one individual, or heavily favor one spouse's account assuming that the funds will be shared later in life. In the event of a divorce, some New Jersey residents might assume that money in their partner's account isn't able to be divided, and thus don't fight for a fair share. This is usually an incorrect assumption.

Around 31 percent of people surveyed within 10 years of divorce said that they did not get part of their former spouse's retirement money and did not know that was possible, according to a recent study. One in four expressed regret that they had not known how to get their share of the benefits. Retirement benefits typically are considered marital property and, like any marital property in a divorce, are subject to asset division. In some cases, only the money put into the account during the marriage is subject to a split.

A common mistake is to give up claim to retirement assets in favor of the marital home. Many experts agree that selling a house and splitting the profits is a better way to go, especially over giving up retirement savings that are likely to increase. However, this does not mean that people should attempt to take money from their partner's retirement account. Rolling benefits over into an IRA, for example, is often more beneficial than taking cash.

For many people, the logistics of splitting assets like retirement accounts can be challenging. A financial planner could assist in the valuation of assets, and this information can be used by a divorce attorney in negotiating a settlement agreement on behalf of a client.

Source: Forbes, "The Big Money Mistake Divorcing Women Make", Kerry Hannon, July 03, 2014

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