We all know that, during the divorce process, assets and property must be divided between both spouses. However, although this might seem straightforward, the process is often complex, especially if retirement assets are involved. To successfully split retirement assets without incurring an early withdrawal penalty, a qualified domestic relations order (QDRO) is necessary. If you and your spouse do not have any retirement assets, you will not need a QDRO.
Splitting Retirement Assets in a Divorce
A judge will not divide all of your retirement assets if some of them were accumulated before you were married. Only the contributions you or your spouse made during the marriage will be subject to division. The QDRO will appoint an alternate payee of the retirement plan and state what percentage of the retirement plan the non-employee spouse will receive.
Pensions can be substantially more difficult to divide, however, since these benefits build up unevenly throughout the years and are generally not payable until the spouse retires. To divide a pension plan, the court must calculate the portion of the pension the non-employee spouse should receive based on the duration of the marriage instead of how long the employee spouse worked to earn the benefits.
QDROs are crucial for dividing retirement assets in a divorce. Keep in mind that federal law imposes a 10% penalty for those who choose to withdrawal before the age of retirement. A QDRO protects spouses from having to unfairly pay penalties or taxes when dividing these assets with your spouse. Moreover, a QDRO can also provide survivor benefits with the employee spouse dies.
Other Options
If this still sounds complicated to you, there are other options available, which would allow you to forego a QDRO. For example, you might consider trading another asset that is equal in value in exchange for keeping your retirement benefits intact. In some cases, when spouses have similar retirement plans and made comparable contributions throughout the marriage, a judge might let both of them keep their respective retirement plans.
Ultimately, before you decide that a QDRO is necessary, you should first hire a divorce attorneys who can advise you on the best course of action for your circumstances.
Discuss Your Divorce Case During a Free Consultation Today!
If you are getting a divorce and have retirement assets, you will need experienced legal representation to assist you throughout this process. At The Franklin Law Firm, our divorce team has the knowledge and insight necessary to effectively navigate even the most complex property and asset division matters. Although you might not be ready to retire now, the day will eventually come when you will rely on these benefits, so it is crucial to ensure they are divided appropriately. You can rely on our team to ensure your interests are protected and that the future remains bright.
Contact us today at (347) 343-5467 to set up a free initial consultation with a trusted member of our legal team to discuss the details of your case.