Dividing Retirement Assets During Divorce

Often, when couples begin contemplating divorce, they imagine having to divide things like bank accounts, real estate, and personal possessions. While it’s true that divorcing couples do need to split up these kinds of assets, they will also likely have to divide up more complex kinds of properties, like retirement assets. Some retirement assets, including pension plans and 401(k) accounts can end up being quite complicated to divide, as they require the completion of a legal document known as a Qualified Domestic Relations Order (QDRO). Read on to learn more about these legal orders and how they allow non-employee spouses to collect a portion of an employee’s retirement assets during divorce.

Retirement Accounts During Marriage 

Married couples acquire a wide range of assets during the course of their marriage. This includes retirement accounts, like IRAs, pension plans, and 401(k)s, which are often not only funded by the parties’ own contributions, but by their employers as well. These accounts can also accrue income via investment, so they can become quite valuable over lengthy marriages. Dividing them, however, can be complicated, as many are funded with pre-tax income, so they are only taxed when withdrawn. This is where a QDRO comes into play.

What are QDROs? 

QDROs are a type of legal record that, when approved, allow non-employee spouses to collect a portion of the retirement benefits earned (during the marriage) by a soon-to-be former spouse. This decree orders a plan’s administrators to release the funds to the non-employee spouse, so without such a document, a non-employee partner wouldn’t be able to access his or her share of retirement assets until the employee spouse actually retired, which may not be until years, or even decades later. This can result in a lot of financial strain, especially for non-employee spouses who were relying on those accounts for their own retirement. The amounts received could be in a specific dollar amount or take the form of a percentage of the entirety of the account.

How Do I Obtain a QDRO? 

The process of obtaining a QDRO is often complex and usually varies based on the specific retirement plan in question. Most, however, will need to engage in the following steps when attempting to divide a 401(k) or pension plan:

• Identifying the retirement plans in question;
• Determining how much of the asset the non-employee spouse is entitled to receive;
• Drafting the QDRO in accordance with the plan’s requirements;
• Submitting the QDRO to the court for final approval; and
• Sending the QDRO to the retirement plan’s administrator for execution.

Any misstep during this process can result in an unequal distribution of retirement assets upon divorce, which is why couples with retirement accounts are encouraged to work with an attorney when drafting and submitting a QDRO.

An Experienced Florida Property Division Lawyer 

The portions of 401(k) plans, IRAs, pension plans, and other retirement accounts that were accrued by a spouse during marriage are subject to division upon divorce. Dividing them can, however, be a lot more complicated than splitting up other kinds of financial accounts. Experienced Florida property division lawyer Sandra Bonfiglio, P.A. can help walk you through the process and ensure that your rights are protected.

Sources: 

thebalancemoney.com/what-s-a-qdro-2894206

irs.gov/retirement-plans/plan-participant-employee/retirement-topics-qdro-qualified-domestic-relations-order