Property division is one of the most common sources of conflict in any divorce. It is the court’s responsibility to equitably divide marital property between each spouse at the end of their marriage. This process can be especially complex when retirement plans are involved. Thankfully, a dedicated asset division attorney can help you plan for avoid issues in the future.
To divide retirement plans in a way that does not result in unnecessary tax consequences, you might need a Qualified Domestic Relations Order. You can learn more about these orders during a consultation with a Cobb County Qualified Domestic Relations Order (QDRO) lawyer.
Many assets can easily be divided without the need for a Qualified Domestic Relations Order. A QDRO often comes into play when pensions or retirement accounts are involved. If each spouse has a comparable pension, however, the simplest option might be to simply remove the other party as a beneficiary as opposed to drafting a QDRO.
In cases where the only equitable option is to divide the funds in a pension or retirement fund, liquidating the funds could have severe tax implications, potentially resulting in a significant financial losses for both parties. A QDRO works around this problem.
While the fund remains in the name of the original party, the order names the spouse as an “alternative payee.” This does not trigger any tax consequences or penalties, but it does provide the other spouse with rights to receive a set portion in the future. A QDRO must be specific in identifying the retirement plan and setting out exactly how much the alternate payee is entitled to.
There are certain limitations to be aware of when it comes to pursuing a QDRO. For example, a QDRO cannot provide a benefit that is not already provided by the retirement or pension plan in question. Specifically, a QDRO cannot entitle a spouse to an amount of money that exceeds the total value of the retirement account or pension.
A QDRO also cannot be used to increase the total benefits a party receives in their retirement or pension account. The amount of benefits is set by the terms of that person’s employer or state law. A QDRO cannot alter those terms to increase the total amount paid out to the beneficiaries.
One QDRO also cannot alter the benefits promised to the beneficiary of another Qualified Domestic Relations Order. If another order sets a previous spouse as an alternate payee, that person’s share of the retirement plan cannot be carved up and distributed under a subsequent QDRO.
Understanding these limitations is important, as a QDRO that violates these basic principles could be voided, resulting in costly tax consequences for all parties involved. The safest way to ensure these orders meet the requirements under the law is by working with a Cobb County QDRO lawyer.
A QDRO is a complex legal document that can be difficult to secure without the help of legal counsel. Attempting this process alone could also make things even more challenging in the future.
Protect your future by working with a Cobb County Qualified Domestic Relations Order (QDRO) lawyer at our firm. Call today to get started on yours.
Atlanta Divorce Law Group