Divorce and Retirement
A retirement fund, whether an individual or workplace plan, is often a divorcing couple’s largest asset. It is highly advisable to seek professional help in dividing a retirement fund. If the process is not carried out correctly, you can suffer steep tax penalties or an unintended amount might end up going to your ex-spouse. It is important to speak with a trusted, experienced divorce attorney who can help you understand exactly what is at stake and how to proceed.
Dividing 401(k) Funds, Pension Plans, and IRA’s
A Qualified Domestic Relations Order (QDRO) is required in order to legally access your share of a 401(k) or pension plan. The QDRO is separate and processed differently from the divorce agreement. The process for filing a QDRO is a specialized area of divorce law that requires an attorney with a high level of experience. Your attorney will contact the trustee or administrator to discuss the necessary steps to transfer your share of the fund or benefits. If more than one account is getting split, a separate QDRO order is required for each.
You can choose to have 401(k) funds transferred straight to an IRA (called trustee-to-trustee transfer) or receive the money directly. Divorce allows individuals to access 401(k) funds before the age of 59 without being penalized. However, you must pay income tax on the money received. Once you choose where you want the funds to go, the type of distribution must be specified in the QDRO.
Dividing an individual retirement account (IRA) does not require a separate order. The custodian of the IRA will require a copy of the divorce agreement and have paperwork for the owners of the IRA to fill out. The rollover IRA should also be ready to receive funds. To ensure that you do not face unnecessary taxation or penalties upon withdrawal, consult with an experienced divorce attorney.
Speak With a Divorce Attorney
Claudia J. Zucker proudly serves the northern Virginia area, assisting in divorce and family matters. Contact our Fairfax office at (703) 596-1005 to learn how we can help you split your retirement funds and file for divorce.
