When spouses get divorced, they must split all of their marital assets, including any retirement assets accumulated throughout the duration of the marriage. To properly divide these assets, however, you will need what is known as a qualified domestic relations order (QDRO). A QDRO is a legal order from a court that can be used to divide retirement assets from qualified plans, such as a pension plan or 401(k). If you and your spouse do not have any retirement assets, you will not need a QDRO during the divorce process.
What Are the Advantages of a QDRO?
A QDRO is beneficial for both parties involved. Without it, the participant would have to pay a 10% early withdrawal penalty. With a QDRO, you can avoid this penalty while giving your former spouse the any retirement assets awarded in the divorce.
Here are some other advantages of using a QDRO:
- Your former spouse will have to pay taxes on benefits distributed under a QDRO. Therefore, although you were the original participant, you will no longer be on the hook for the taxes on your spouse’s portion of retirement benefits.
- Your former spouse can receive retirement benefits even if you die. If you would like to secure the financial future of your ex, a QDRO can help accomplish this.
Moreover, if you receive retirement benefits through a QDRO, you have a number of options available when it comes to how you choose to handle the amount you receive. You can roll the money over into an IRA, take it as a lump sum, keep it in a qualified retirement plan, take the money as an annuity, or leave it in your former spouse’s plan while having the ability to invest your portion as you wish.
Schedule a Consultation with an Experienced Divorce Attorney to Discuss the Details of Your Case!
If you are getting a divorce and have retirement assets, you will need a skilled divorce attorney to assist you with the process and advise you on the best course of action. At Nichols Dixon PLLC, our family law attorneys have the knowledge and experience necessary to help you navigate this process while protecting your interests. We understand how challenging this process can be and will do what is necessary to make it easier for you and your family.
Reach out to our law office today at (405) 294-1511 to set up an initial consultation with a member of our team to learn more about your legal options.