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The process of splitting assets and property is part of any divorce. If you and your spouse have retirement assets, you will have to divide any contributions you made during your marriage since it is considered community property. However, you cannot simply take funds out of your retirement accounts and divide them without incurring penalties. To successfully divide your assets, a Qualified Domestic Relations Order (QDRO) is required.
What is a QDRO?
A QDRO is a court order that allows certain retirement plan benefits to be divided in a divorce. The order contains instructions on how this will be carried out, so it is crucial for your QDRO to cover all community retirement assets to avoid any potential issues with receiving them later.
Moreover, a QDRO cannot be used for all types of retirement plans. If you have an individual retirement account (IRA), and some government retirement plans or deferred annuities, you will not need a QDRO when dividing these retirement assets during your divorce.
Below are the types of retirement plans a QDRO will cover:
- 403(b), 401(k), and 457 plans
- Profit-sharing plans
- Tax-sheltered annuities
- Thrift plans
- Money purchase plans
- Business and corporate defined pension plans
- Employee stock ownership plans
Is a QDRO My Only Option?
You do not have to use a QDRO to divide your retirement benefits. There are other options available, such as a buy-out, for example, which will allow you to keep your plan by paying your spouse their community property interest. To move forward with this option, you must both agree to the terms, and your Dissolution Judgment must state the specific terms.
If you are interested in a buy-out, knowing the current value of your retirement plan and the amount owed to your spouse is essential. Generally, this process is relatively easy if you have a 401(k) or 403(b), but it can be a little more complex if you have a pension or defined benefit plan since those benefits are paid in the future.
Reach Out to an Experienced Divorce Attorney for Skilled Legal Advice
If you are planning to divorce your spouse and have retirement assets, you will need an experienced divorce attorney to guide you through the process. At Kraft Miles, A Law Corporation, our family law team is committed to helping clients protect their interests, so they can move forward with life’s next chapter.
Call our law office today at (818) 462-5076 to set up an initial consultation and learn more about what we can do for you.