Adults spend decades saving money for retirement. It is not uncommon for young adults in California to start their retirement savings very early on in their careers, which can help secure a more financially stable future. Unfortunately, a large retirement account is quite often vulnerable during a high asset divorce.
Take for example an out-of-state woman whose divorce led to a significant drop in retirement savings. She married back in 1997, and the couple moved into the property that she had purchased with her own money before tying the knot. Several years later, the couple refinanced the mortgage so that they could provide financial support to the wife’s father, who was seriously ill. The husband’s name was added to the deed so that his income would be considered during the refinancing.
The couple filed for divorce 15 years after getting married, and originally planned to use mediation, but instead took things to court at the urging of their friends and family. It was ultimately decided that the couple would sell the family home and split the proceeds. The wife also agreed to give up alimony and delay child support payments in exchange for keeping the retirement savings, which contained both marital and separate assets.
However, after moving to a different state, her ex-husband did not make any effort to sell the house. She had trouble enforcing this part of their divorce settlement from the other side of the country, and lost out on around $250,000, which would have been her portion from the sale. To make matters worse, the retirement savings were incorrectly listed as her sole personal assets rather than a mix of personal and marital property. While dealing with a cross-country move, steep legal fees and no income from the home sale, she was forced to withdraw some of her retirement funds to cover her expenses.
Retirement savings are important assets in California, and as such many people use these accounts as bargaining chips during property division. While this is a common approach, it must be done thoughtfully. Failing to account for future expenses, possible legal fees and how assets will be classified can yield undesirable outcomes for everyone involved. During a high asset divorce it is best to not leave these to chance, so one should be certain that he or she fully understands the process and what is at stake.