Can My Spouse Take My Retirement In A Florida Divorce?
I’m family law attorney Scott Kalish. Today, we’re tackling a question that’s on the minds of many going through a divorce in sunny Florida:
“Can my spouse lay claim to my retirement funds?”
What about stocks, 401(k) plans, pensions, or other benefits? Divorce can be complex, especially when it involves dividing retirement accounts and other assets.
This article, based on an episode of my Florida Divorce Podcast, will help you understand how retirement-related assets are divided during a Florida divorce. Whether you’re dealing with a 401(k), stock options, or a pension, we’ll walk through the process to help you protect your financial future.
If you’d prefer audio, with a podcast episode I covered on this topic, you can listen to it below here. This article is based on what was discussed in this Florida Divorce Podcast episode…
The rest of this article aims to give you an easy to understand explanation how retirement related assets are divided up during a divorce in Florida.
What Florida Law Says About Dividing Retirement Savings
Your Retirement Savings: Is it Marital or Your Own?
In Florida, retirement accounts are divided according to the principle of equitable distribution. This doesn’t necessarily mean a 50/50 split but rather a fair division based on the specifics of the marriage.
According to § 61.076(1), Florida Statutes, any contributions to a retirement plan made during the marriage are considered marital property, making them subject to division.
However, contributions made before the marriage are treated as non-marital property and are typically excluded from the division process.Any retirement benefits accrued before a marriage are not considered marital property under Florida law. These are also known as Non-Marital assets. This difference is what determines if the portion of retirement benefits subject to division.
Under Florida law, however, the portion of retirement benefits that a spouse receives prior to the marriage are not marital property. In order to determine the amount of retirement benefits that the other spouse may be entitled to, it is important to identify the following information:
- The date of employment.
- When the benefits started.
- The value of the benefits when the parties were married.
- The value of the benefits on the date of filing for divorce.
Once that information is identified, there will be a clearer understanding of the portion of the benefits that are marital property and therefore subject to equitable distribution.
Understanding Marital vs. Non-Marital Retirement Assets in Florida
To determine how much of your retirement savings are subject to division, it’s essential to identify key information, including:
- The date of employment.
- The start date of the retirement benefits.
- The value of the benefits on the date of marriage.
- The value of the benefits on the date the divorce was filed.
This information allows courts to calculate the portion of retirement benefits that are marital property. For example, if you contributed to a 401(k) both before and during the marriage, only the contributions and growth during the marriage would be divided.
For a deeper dive into what qualifies as non-marital property, check out our guide on What Is Non-Marital Property in Florida.
Is Florida a No-Fault Divorce State?
Florida is a no-fault divorce state, which means you don’t have to prove wrongdoing to file for divorce. Instead, you can cite “irreconcilable differences.”
This matters because asset division, including retirement accounts, isn’t influenced by who caused the divorce. Instead, Florida courts focus on equitable distribution to ensure fairness for both parties.
How Florida Courts Split Retirement Accounts
What is a QDRO, and How Does it Work in Florida Divorces?
A Qualified Domestic Relations Order (QDRO) is often used to divide retirement accounts like 401(k) plans or pensions during a divorce. It allows for the transfer of funds to the other spouse without incurring taxes or early withdrawal penalties—provided the funds remain in a retirement account.
If you’re going through a Florida divorce, a QDRO is a crucial tool for ensuring a smooth and tax-efficient division of retirement assets.
Dividing 401(k) Plans, Pensions, and IRAs in Florida Divorce
What Happens to My 401(k) in a Divorce?
Any contributions made to your 401(k) during the marriage are generally considered marital property. These contributions, along with any growth during the marriage, will be subject to division.
The QDRO process ensures that your spouse receives their share of the 401(k) without triggering tax penalties or early withdrawal fees. However, funds contributed to the 401(k) before the marriage are considered non-marital property and remain yours.
The IRS has FAQs on IRA Distributions that can also help answer specific questions on this topic.
How Are Stocks, Stock Options, and RSUs Divided?
Stock options and RSUs can be tricky to divide. The portion that vested during the marriage is often considered marital property, while any unvested portions may remain with the original owner. A forensic accountant can help assess the value of these assets based on vesting schedules and tax implications.
In one of our Florida Divorce Podcast episodes, I chat with forensic accountant Jason Soman, we dove into the nitty-gritty of dividing complex assets like stock options and RSUs. These assets, often part of modern compensation packages, can really add layers to a divorce settlement that make it more complicated.
The Intricacies of Splitting up Stocks, Options, RSU's and Other Retirement Benefits
This is where things get technical. We use what’s called a co-venture analysis to figure out which part of these assets is marital and which isn’t. Factors like how the stocks have vested, their tax implications, and what they might be worth in the future all come into play.
Let’s break this down into simpler terms. Imagine you’re working at Home Depot, and as part of your job perks, you get something called stock options. Now, stock options are like having a special coupon to buy Home Depot stock at a fixed price, no matter what the current market price is. For instance, if Home Depot’s stock is trading at $100, and your special coupon (or stock option) lets you buy it for $50, that’s a great deal, right?
But here’s the catch: you don’t actually own the stock or owe any taxes on it until you use that coupon to buy the stock. That’s when the taxman comes knocking.
Then there’s another thing called restricted stock units (RSUs). These are more like getting actual pieces of the company bit by bit over time, usually as a reward for sticking around. You get taxed on these as they become fully yours because it’s like receiving a part of the company as income.
How is the value of Stock Options and RSU's determined in a Florida divorce?
Now, when it comes to divorce, things get a bit tricky with these stock options and RSUs. Imagine you’ve been given 100 Home Depot stock options that become fully yours (vest) over four years. If you get divorced during this time, figuring out which part of these stock options counts as marital property (meaning it can be divided between you and your spouse) can be quite a puzzle. If you received these options before your marriage, they might be considered just yours. But if you got them during the marriage, a portion might be seen as marital property.
Forensic accountants, like financial detectives, jump in to sort this out. They look at when you got these options or RSUs and how they’ve vested over time to figure out what’s fair game in the divorce and what isn’t. It’s a complicated process because each stock option and RSU has its own schedule of becoming yours, and the timing of your divorce plays a big role in what you get to keep and what you might have to split.
How Are Stocks, Stock Options, and RSUs Divided?
Dividing stocks, stock options, and RSUs (Restricted Stock Units) can be complex. Generally:
- Vested shares and options earned during the marriage are considered marital property.
- Unvested shares and options may remain with the original owner, though courts may apply equitable distribution rules to portions tied to the marriage.
Forensic accountants often play a role in valuing stock options and RSUs, as their value depends on vesting schedules, market conditions, and tax implications.
Finding out about stock options and RSUs is a key step. Looking through employment agreements, W-2s, pay stubs, and stock plans is part of the drill, especially if we’re dealing with publicly traded companies. Often times forensic accountants get involved in figuring out the value of these as assets as I just mentioned.
Stock options and RSUs can be tricky to divide. The portion that vested during the marriage is often considered marital property, while any unvested portions may remain with the original owner. A forensic accountant can help assess the value of these assets based on vesting schedules and tax implications.
How is the Value of Stock Options and RSUs Determined?
Let’s break it down:
- Stock Options: These are like coupons allowing you to purchase company stock at a discounted rate. Their marital portion depends on when the options were granted and vested.
- Restricted Stock Units (RSUs): RSUs are company shares given as part of a compensation package. They vest over time, meaning their marital status depends on whether they vested during the marriage.
If you received stock options or RSUs before your marriage, they may be treated as non-marital property. However, shares granted and vested during the marriage are typically divided.
How Are Pensions Handled in Florida Divorces?
Pensions earned during the marriage are also subject to division. Florida courts often use a QDRO to allocate a share to the non-employee spouse. It’s critical to understand your pension’s value and the rules for dividing it fairly.
Pensions earned during the marriage are treated similarly to 401(k) plans. A QDRO or similar legal order ensures that the non-employee spouse receives their fair share.
Can My Ex-Spouse Claim My Pension After the Divorce?
Yes, if your pension wasn’t addressed during the initial divorce settlement, an ex-spouse might later attempt to claim a portion. Ensuring all retirement assets are accounted for in the settlement can help prevent future claims.
The Real-World Application: Dealing with Different Retirement Benefits
Every Retirement Account is Unique
Whether it’s a government pension or a private 401K, the possibility that your spouse might be entitled to a piece of it is real. The division of these assets is a delicate dance that requires a thorough understanding of Florida’s laws and a keen eye for fair distribution.
A typical Florida divorce settlement divides marital assets like the family home, vehicles, and retirement accounts equitably, though not always equally. The concept of equitable distribution means that courts aim for a fair division based on each spouse’s financial situation, contributions to the marriage, and needs post-divorce.
Taxes and Timing In Dividing Assets: Critical Considerations. Will I Pay Taxes on Retirement Funds I Receive in a Divorce?
Don’t forget about the taxman. How and when you get taxed on these assets, like stock options and RSUs, can really influence how they get divided up in a divorce. And with different vesting schedules, things can get more complicated.
When dividing retirement accounts or stocks, taxes are a critical consideration. Assets like stock options, RSUs, and pensions may be subject to taxes when distributed or cashed out.
For instance:
- If a QDRO is used, retirement funds can be transferred tax-free.
- Dividing taxable assets (like stocks) unequally can create unfair tax burdens for one spouse.
It’s essential to work with financial experts to ensure a fair settlement while minimizing tax liabilities.
The tax aspect is important because if you’re dealing with a long drawn out divorce, were the taxes paid on marital units with marital funds? Or were they paid with non marital funds? Things like this can get very thorny when it comes to taxes.
Are we dividing the current brokerage account which includes options that invested that are also non marital so should I be getting a credit for taxes? The tax issues depending on the timing of the date of marriage, the timing of the date of filing, the time of when you actually divide these things during a mediation or a trial date.
This can make a big difference in how much one party ends up having to pay in taxes when it comes to how these assets get divided. You don’t want to take an asset that’s subject to tax, for equal distribution versus someone who gets an asset free and clear.
If a QDRO is used correctly, you can transfer retirement funds to your ex-spouse without immediate tax penalties. However, if the funds are withdrawn instead of rolled over into a retirement account, taxes and early withdrawal penalties may apply.
The timing of asset division, especially for stocks or retirement accounts, can affect tax liabilities. Dividing assets with different tax treatments can result in one spouse owing more taxes than the other, impacting the fairness of the settlement. You can reference the “IRS Guidelines on Splitting Retirement Savings – Divorce” for more info on this.
Public vs. Private Company Assets In Divorce: What You Need to Know
Navigating Equity in Public vs. Private Companies
When dividing retirement assets tied to companies, public and private stocks require different approaches:
- Public Company Stocks: Values are transparent and easy to calculate.
- Private Company Stocks: Their value may be uncertain, requiring appraisals or negotiations.
In some cases, constructive trusts or other creative solutions may be used to handle private company assets during divorce.
Constructive Trusts and Negotiation: Creative Solutions
Sometimes, you can’t just hand over these assets to your spouse. We might need to set up something called a constructive trust to hold these assets in the meantime. Or figure out other ways to divide them, keeping in mind their potential future value.
You may be able to negotiate it out where one person holds the stock and the other person take some other type asset.
The Dual Nature of Equity Compensation
In the world of divorce, equity compensation can wear two hats: it can be an asset to be divided or considered as income for things like alimony or child support. This depends on how often these benefits come in and how easy they are to access.
Common Divorce Settlements in Florida
What is a Typical Divorce Settlement in Florida?
A typical Florida divorce settlement divides marital assets like the family home, vehicles, and retirement accounts equitably, though not always equally. The concept of equitable distribution means that courts aim for a fair division based on each spouse’s financial situation, contributions to the marriage, and needs post-divorce.
Can I Keep My House in a Divorce?
Frequently Asked Questions About Divorce and Retirement in Florida
Does Florida Have Alimony Requirements?
Yes, Florida offers several types of alimony, including temporary, rehabilitative, and permanent. Alimony decisions consider each spouse’s financial needs and can affect retirement plans, as alimony payments may be derived from a pension or retirement income. Read this article to learn more on this subject: How Retirement Affects Alimony in Florida: What Both Spouses Need to Know in 2025
What is the Role of Mediation in Dividing Retirement Assets?
Mediation offers a less adversarial way to resolve asset division, including retirement accounts, without going to court. This option can be quicker and more cost-effective, especially if both spouses agree on how to divide the assets.
Conclusion: Navigating Retirement Division in Your Florida Divorce
Dividing retirement assets, especially those tricky stock options and RSUs, in a Florida divorce is anything but straightforward. With a mix of tax implications, vesting schedules, and the intrinsic nature of each asset, it’s a path best navigated with expert guidance.
Looking for more insights or need some personalized advice for your divorce?
I’m here to help. Contact me for a free strategy session to discuss your unique situation and how we can best protect your retirement and assets during the divorce process. And don’t forget to check out our Florida Divorce Podcast for more insights and practical advice!
If you’re not sure if you should file for divorce first, be sure to check out this article exploring the advantages and disadvantages of being the first to file for divorce in Florida.
