Marriage can be a wonderful thing, tragically, 40-50% end in divorce. The legal and financial implications of a divorce can be complicated, but there are steps you can take to prepare for life after the divorce and protect your retirement accounts. Read on to learn about property division rules by state and how to adjust your retirement plan, savings strategies, investments, budgeting plans, and more following a divorce.

Obtaining Summary Plan Descriptions (SPDs) of Retirement Accounts

The first step in preparing for life after a divorce is to obtain copies of all the Summary Plan Descriptions (SPDs) for any shared retirement accounts or pensions. This document will show what type of account it is and how much money each spouse has contributed over time. It's important to review this information so that both parties know what they are entitled to receive as part of the property division process during the divorce proceedings.

Creating a New Retirement Plan and Updating Beneficiaries on Existing Accounts

If one party was not previously saving for retirement, now is the time to create a new plan. This could include opening an individual retirement account (IRA) or contributing to a 401(k) plan through work. It's also important to update existing beneficiary designations on any retirement accounts shared with your ex-spouse; otherwise, those assets may be transferred automatically upon death without passing through probate court.

Understanding Taxation Rules for Different Types of Retirement Plans

It's also important to understand taxation rules for different retirement plans before deciding what to do with them following your divorce. Traditional IRAs and 401(k)s are tax-deferred accounts, meaning that you don't pay taxes on contributions until distributions are taken out in retirement; Roth IRAs are funded with post-tax dollars but provide tax-free growth potential over time, while SEP IRAs allow self-employed individuals or small business owners to make larger contributions than other types of IRA accounts.

Each State Handles Property Division Differently

When getting a divorce, it can be hard enough to manage all the personal and emotional implications; understanding the financial ones can add another layer of complexity. Since the rules for property division, one of the main contributors to retirement funds, vary depending on where you live, becoming knowledgeable about your state's regulations is essential in preparing a solid foundation for life after divorce. Planning with this knowledge can help ease the transition and provide some stability during what could otherwise be an uncertain time. By researching property division laws, you'll still be moving forward instead of backward.

Conclusion:

Preparing financially after a divorce can be overwhelming if you don't know where to start—but understanding your rights regarding property division rules by state, obtaining Summary Plan Descriptions of shared retirement accounts, creating new plans if needed, updating beneficiaries on existing accounts, and understanding taxation rules for different types of retirement plans can help make this transition smoother. Don't forget to take time for yourself during this adjustment period! Taking care of yourself emotionally is just as important as creating an updated budgeting plan or reevaluating investments post-divorce. Call an experienced advisor today if you are going through a divorce and have questions about your retirement plan and the division of your assets and property.

• Advisory services are offered through Aegis Wealth Management, Inc. which is registered as an investment advisor with the SEC and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the advisor has achieved a specific level of skill or ability.

• Information presented is believed to be current. It should not be viewed as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Aegis Wealth Management, Inc., is not engaged in the practice of law or accounting. Tax rules are subject to change at any time. Content was prepared by a third-party journalist.