Indiana couples over the age of 50 who are contemplating a divorce may have life-changing issues to consider, including the source of any future income. A long-term marriage may create a household consisting of one working spouse and a nonworking marital partner. The efforts and contributions of both spouses, however, are important factors to consider during a divorce, especially when dividing property and assets.

The division of retirement plans such as pensions, IRAs or a 401(k) requires careful planning. Because many older individuals may find it challenging to start a new job or career, retirement benefits might be a much-needed source of income for the nonworking spouse.

Nonworking spouses and contributions of effort to a retirement plan

According to Kiplinger magazine, obtaining a qualified domestic relations order is a requirement when deciding how to divide a workplace retirement plan. If a nonworking spouse contributed to the working spouse’s ability to earn the household’s income and direct funds to the retirement plan, that contribution of effort may entitle the nonworking spouse to a portion of the plan’s proceeds.

Depending on the plan, an ex-spouse may request a lump sum payout from a workplace-sponsored fund. Some payouts, however, may be taxable or come with a withdrawal penalty.

Alimony or spousal support

The nonworking spouse’s ability to support him or herself after a divorce may require some thoughtful planning in order to avoid what might become a contentious legal battle. As reported by Barron’s, a lump sum payout along with a plan for a budget may help to realistically determine the amount of alimony or spousal support. Depending on how much each spouse contributed to the household’s income and well-being, the court may view an equal split of assets as reasonable.

Indiana is an equitable distribution state, which means property, assets and income division will reflect what the court considers “fair.” While a working spouse may initially resent a payout from a retirement fund made to a nonworking ex-spouse, it may prove a way to amicably reduce monthly alimony or financial support obligations.