When Divorce Gets Nasty, Protect Your Assets

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One angry Two and a Half Men (VIA) star does not want you to watch an upcoming E! reality show starring his ex-wife  and his two young daughters.

That's the message Charlie Sheen, 42, is broadcasting this week, adding yet another round of public squabbling to his nasty split with with actress Denise Richards, 37. The couple, yet another in a long string of splitsville celebrity couples in the news in 2005, have already used the media to fire shots in their high profile custody and visitation battles. Now, after Sheen failed to get a court to overturn a judge’s ruling that gives Richards permission to include their two daughters, Sam, 3, and Lola, 2, in her new reality show, he is appealing to the court of public opinion. "I think we should all just boycott the damn thing!" Sheen told OK! magazine. "Issue a mass boycott."

Divorced movie stars can fight over reality shows. But real life divorcees usually fight over money, especially when it comes to splitting their individual 401(k) savings. Some dependent spouses worry that their working partner will withdraw all the 401(k) money before a divorce. But, as long as you file for divorce promptly, you should be OK, says Ronald Carlin, a divorce attorney.  “Once a [divorce] complaint is filed, it is pretty standard to get an order freezing all assets preventing either spouse from withdrawing money.” According to Carlin, savings in a 401(k) are generally considered shared property from the date of marriage through the date of complaint for a divorce.  This means that the money will be spilt according to state laws.

Jay Berger, a certified financial planner says that because 401(k)s are governed under the Employee Retirement Income Security Act (ERISA), there are specific measures that must be taken to insure the account can be split.  A court will need to issue a Qualified Domestic Relations Order (QDRO) and then it must be taken to the 401(k) provider.  The QRDO allows the money to be moved from retirement fund to retirement fund when it is split between spouses. “This is one of the only times that asset ownership can be changed and that a 401(k)’s assets can be assigned a new social security number,” says Berger. 

This is also one of the only times that money can be taken from a 401(k) without penalty of tax.  For that reason, a third party financial institution is often used to insure the transfer is done correctly.  Berger suggests hiring a financial planner who would also set up an IRA for a dependent spouse’s share of the money.

All in all, the division of 401(k)s is a relatively simple process but it pays to know what needs to be done to make the transfer easier. “The good thing about 401(k)s is they are pretty basic," says Carlin. "Anything earned during the marriage is included and anything that was accumulated before or after is not."

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