A divorce case will involve a number of different types of financial issues. Depending on the complexity of a couple’s finances and the marital and separate assets they own, determining how to divide marital property can be a complicated process. Retirement accounts are one type of property that may need to be addressed during the divorce process, and couples will need to make sure they understand the issues that may affect how these accounts will be divided.
Division of 401(k) Accounts, IRAs, and Pensions
Retirement savings accounts may be valuable assets that a person will rely on to provide for their financial needs in the future. When an account in one spouse’s name was created or contributed to during a couple’s marriage, it will usually be considered a marital asset that will need to be addressed during the divorce process. Couples may take a few different approaches when dividing these accounts, such as splitting the funds in an account equally, or allocating a certain percentage of an account to each spouse, or having each spouse keep accounts in their names while ensuring that other assets are divided in a manner that is fair and equitable.
When spouses choose to divide the funds in an account, they will need to follow the correct legal procedures to ensure that they will not be required to pay early withdrawal penalties. For employer-sponsored accounts such as 401Ks, a “Qualified Domestic Relations Order” (“QDRO”) can be prepared, and this “QDRO” will provide instructions to the retirement plan administrator on how funds should be transferred.
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