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How do deferred compensation accounts, 401k, and retirement benefits get divided during a divorce?

The court will split these 50/50 if it was all acquired during the marriage. There is no penalty to divide and the money is not removed from the accounts. After the division, each party is subject to IRS rules for prematurely withdrawing the money. One spouse cannot create a tax liability for the other spouse. The money/account should not be withdrawn during the pending divorce.

A Qualified Domestic Relations Order may be required if you are dividing your deferred compensation, 401k, or retirement benefits. If this is the case, a QDRO expert may be necessary to divide these assets. The QDRO expert will require information concerning the date of your marriage and the date of the plan to value, which is usually the date the QDRO expert actually divides the asset. You will need to contact a QDRO expert for this.

What Happens to Debts During a Divorce?

Arizona Revised Statute 25-318 provides that debt incurred during the marriage is presumed to be community debt. Generally, the court divides debt equally. Debt incurred by a spouse before the marriage remains the separate debt of that spouse. The court may also order the parties to submit a debt distribution plan. This means that within thirty (30) days after receipt of a written request for information from a litigant (which includes the court name and case number), a creditor shall provide the balance and account status of any debts of either party or both spouses, identified by account number, for which the requesting spouse may be liable to the creditor.

How Does Arizona Law See Division of Property?

You and your spouse may decide this for yourselves, but it is important to note that Arizona is a community property state. In accordance with Arizona Revised Statute 25-211, community property is all property acquired during the marriage by the efforts of either party through the date of service of the Petition for Dissolution. The court presumes that each spouse is entitled to 50% of the assets acquired during the marriage. Also, the courts generally seek to divide debt equitably in a divorce case. This does not automatically mean that each spouse will have 50% of the debt assigned to them. The court will take into consideration the spouse’s income, ability to pay debts and issues of waste of community property assets.

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