Protecting What Matters Most

How are retirement accounts divided during divorce?

On Behalf of | Jul 25, 2023 | High Asset Divorce

People going through a divorce must divide the assets they accumulated during the marriage. This includes their retirement accounts. Some couples are lucky because each person has their own account, and both accounts are relatively equal. In that case, both parties could keep their own account. 

Moving funds from one party’s retirement account to the other person’s might be necessary when there’s only one account or when the accounts aren’t equal. For certain retirement accounts, including 401(k) accounts, this is done through a court-ordered qualified domestic relations order

What is a QDRO?

Moving retirement account funds from one person to another incurs specific penalties and taxes unless the person who owns the account is at retirement age. By getting a QDRO, you can avoid those penalties and taxes as long as the recipient is moving the funds into their retirement account. 

The QDRO is a very specific document. It must contain certain information, including how the retirement account must be divided. The court must approve the order before being sent to the plan administrator, who must also approve the order. The plan administrator can return it to the court for correction if anything is amiss. 

A critical point about a QDRO is that it can only distribute what’s contained in the account. It can’t order funds that aren’t there to be sent to the second party, and it can’t contain any terms that go against the rules of the account.

Remember, dividing the retirement accounts is only one thing you must take care of during the property division process. Working with someone who can help you navigate through it all is beneficial. 

Archives

FindLaw Network