Dividing Retirement Funds in a Divorce

In many marriages, the retirement accounts of the couple may be the largest financial assets they share, especially if they have worked for many years. When that couple divorces, many questions arise as to how to equitably split up the retirement accounts. In many cases, fears about whether and how these assets can be divided often prevent a couple from seeking a divorce.

An equitable division can be reached and an experienced divorce attorney can guide you to protect your interests. A Qualified Domestic Relations Order (QDRO) is needed in a divorce proceeding when a pension, 401(k) or other retirement account is involved. A QDRO is a decree or order for the equitable division of retirement savings plans, pensions, 401(k)s and other retirement accounts.

While the distribution and division rules can vary depending upon which type of retirement account is involved, generally a QDRO is drawn up by an experienced person that separates the portion of the retirement account that is awarded to the non-owner spouse. This portion will be transferred to another qualified account in the non-owner spouse’s name. This basically allows a plan administrator to make payments to the former spouse of an employee according to the divorce final judgment order entered by the court.

Issues often arise over how to equitably value the accounts. The date of valuation is determined either by the parties’ agreement or by court order. The valuation date could be the date of the couple’s separation, the date the dissolution of marriage was filed, the date the marital settlement agreement is signed, or the date of the final judgment order. Once the plan administrator has approved the QDRO, it goes to the court for final approval. Then the order is sent to the plan administrator and the funds are divided. This whole process can take months to complete. An experienced divorce attorney often gets the process started early in the divorce proceedings.

Equitable division of retirement accounts is possible, so don’t let division of your retirement accounts stop you if you wish to divorce.

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