One of the primary concerns in any divorce is the division of marital property, in which the assets and debts accumulated during a marriage are allotted between spouses. Among the most valuable assets in many divorces are retirement accounts, including the popular 401(k), which is utilized by approximately 32 percent of U.S. adults.
Unless a couple has a prenuptial agreement in place that dictates otherwise, retirement savings accounts are subject to division in a divorce. Key to this process is the Qualified Domestic Relations Order (QDRO).
QDRO in Divorce
A QDRO is a court order that grants an individual a portion or the entirety of their former spouse’s retirement benefits plan. These orders are usually prepared by a couple’s attorneys during the divorce process. The account holder is referred to as the “participant,” while the added recipient is the “alternate payee.”
In a divorce in which a couple negotiates their own divorce agreement, the divorcing spouses can determine how a retirement account should be divided. In contentious divorce proceedings, division is left to the court. The amount given to the alternate payee can rollover into their existing retirement plan, or it can be disbursed as a cash payment, subject to applicable taxes. This includes a 10 percent tax penalty on top of regular income tax.
For successful submission, a QDRO must include:
- Names and addresses for both the participant and alternate payee.
- The name of each retirement plan to which the QDRO applies.
- The percentage or dollar figure of the account to be paid to the alternate payee.
- The duration or number of payments to which the order applies.
Once a QDRO is completed, your attorneys can submit it to the retirement plan provider for approval and implementation. If the provider rejects the order, they must do so with a precise explanation why, including steps on what to do in order for it to be accepted.
Contact a Brooklyn, NY Marital Property Division Lawyer
When you begin the divorce process, you need a skilled attorney who will protect your long-term financial future. To avoid unnecessary future disputes and court battles, you want an experienced New York City divorce lawyer who can negotiate a favorable and lasting divorce agreement. At Goldberg Sager & Associates, we will not agree to any settlement that is not in your best interests. To learn how we can help, call us at 718-645-6677.
Sources:
https://www.thebalance.com/how-retirement-plan-assets-are-divided-in-a-divorce-1289260
