Divorce can be one of the most stressful decisions you and your partner ever endure. Not only is it emotionally demanding, but it can also be financially stressful for the entire family. During your divorce, it is imperative that you and your partner make informed decisions regarding the division of property you accumulated during your marriage. Because retirement savings are one of the largest and most valuable assets a couple can own, it is a very important and one of the most complicated issues in divorce proceedings due to the tax implications.
If you and/or your partner have a 401(k) plan, pension plan, or other type of employment-sponsored retirement plan, you are legally entitled to part of the balance assuming you do not have a prenuptial agreement in place stating otherwise. Likewise, your partner is legally entitled to part of your retirement account value if you have one.
However, if your partner was the primary provider, there are still ways to protect your share of their retirement account. Typically, a Qualified Domestic Relations Order (QDRO, pronounced “qua-dro” or “cue-dro”), can protect your interest by helping you receive your entitled share.
Consider a Qualified Domestic Relations Order
A QDRO is a domestic relations order, decree, or judgment that recognizes or can instruct your spouse’s pension plan on how to pay you your share of plan benefits. Unlike a marital settlement agreement, a QDRO protects and guarantees that the retirement plan is separated, withdrawn without penalty, and deposited into the non-employee spouse’s retirement account. Also, it is important to know that QDROs only apply to plans that are IRS tax-qualified and covered by the Employee Retirement Income Security Act (ERISA); they do not apply to military and government pensions, and you do not need a QDRO to divide IRA or SEP assets.
Consult a QDRO Specialist
A Domestic Relations Order is not considered Qualified unless it has been approved by the retirement plan’s Plan Administrator and the court. You should also consider hiring an attorney who specializes in QDROs to ensure all related issues in your marital settlement agreement are incorporated into the QDRO. This way, your rights are protected in a way that a generic QDRO form cannot provide. Your attorney should read the retirement plan’s summary plan description and all other plan documents to ensure the QDRO’s and plan’s terms are in agreement. Ultimately, QDROs can be very complicated and time-consuming, which is why it is important to consult a specialist to help you through the paperwork and overall process.
One of Rieger, LLP’s experienced family lawyers in Garden City can help guide you through the complicated hurdles of divorce. Visit us today on Long Island or call (516) 280-8880.