Retirement and Divorce

One of the largest assets when navigating a divorce settlement is a retirement account or pension. The complexity of these accounts and the accompanying tax burden are often overwhelming. As a result, the chances of mishandling of these accounts during a divorce is often high. This can lead to much pain down the road for one or both parties.

When getting a divorce or separation, it pays to know what will happen to any retirement savings from either spouse. 

Splitting A Retirement Account

If your spouse receives a 401(k) or some other type of pension plan, you are entitled to part of the outstanding balance on that account. The balance on a retirement account is marital property if you or your spouse contribute to it during the marriage. The only exception to this is if you signed a prenuptial agreement. This may specifically states you have no claim to any funds from your spouse’s retirement plan.

What you don’t want to see happen is your spouse asks for disbursement of their retirement balance. The balance may get paid out or rolled over to an account which is hidden or in their name only. You don’t want a situation where funds are handed out and you see little or nothing.

QDRO: Qualified Domestic Relations Order

A QDRO (pronounced “quad row”), or Qualified Domestic Relations Order, is a special court order that helps establish child support, property rights, or alimony. In the case of a retirement plan, serves as instructions to the manager of that plan on how to pay out benefits to both parties in a divorce.

You may have a settlement agreement with your spouse that dictates you get a share of their retirement plan balance. However, this is not enough protection. A QDRO guarantees that you can seperate and withdraw from the retirement plan balance no penalty. It also provides protection in that the disbursement of funds can then be put into a retirement account for the non-employee spouse, which would typically be an IRA.

You have protections with a QDRO that you don’t have with a standard marital agreement. Your attorney can help ensure that your rights to part of the retirement plan balance remain intact. Please note that QDROs do not cover government or military pensions. They also do not cover IRA or SEP plans. There are other rules in place for all of these accounts, so you need to consult with an experienced attorney.

An Attorney Is Vital

While many retirement plans have QDRO forms to fill out, we do not recommend doing it yourself.  A QDRO has to be certified by both the Court and the manager of the retirement plan.  A generic QDRO most likely does not take into account all of the central issues that are incorporated into your divorce settlement agreement.

When it comes to retirement and divorce, to make sure all of your rights are protected, you need to hire an attorney who has experience with retirement plan settlements. Family Matters Law Group has been helping clients in Henry, Clayton, and Fayette counties, as well as the greater metro Atlanta area, for many years. We have experience in getting our clients their fair share of any retirement plan balances. Contact us today and let us see how we can help you navigate retirement and divorce!