Divorced couples who divided retirement or pension funds may need to take additional steps to protect themselves financially post-divorce. While many assets can simply be liquidated in order to ensure both spouses get their fair share, that is not always the case with retirement and pension accounts. These accounts face steep penalties and tax liabilities when they are transferred or withdrawn from before the specified time. These penalties can eat up much of the savings accrued in the accounts.
An experienced asset division attorney can help protect you with a Qualified Domestic Relations Order, which effectively splits the proceeds of an account without formally transferring ownership and distributes funds without triggering certain tax consequences. You can learn more about this option during a consultation with a Dekalb County Qualified Domestic Relations Order (QDRO) lawyer.
Courts are required to divide marital assets in an equitable way. When one spouse has substantially more in a retirement account than the other, the only way to obtain an equitable division might be to split that account.
However, federal law prevents the transfer of certain types of retirement plans without court intervention. In other words, the law requires that any transfer of certain retirement plans is made through a formal court order.
A QDRO drafted by an attorney and approved by a Dekalb County judge would count as a valid court order. The major benefit of having a QDRO is that it can prevent costly fees or unnecessary tax obligations associated with taking funds out of a pension or retirement account early.
There are also times when a QDRO might not be necessary. For example, the courts can work around the issue without a QDRO when both spouses have equally-sized retirement plans. If it is possible to divide assets equally without splitting retirement plans, the court will generally do so.
Not every type of investment plan requires a QDRO. In some situations, dividing a retirement account could be possible without steep financial consequences. This is because not all accounts come with these penalties or limitations. For example, there is no need for a QDRO for a personally managed Individual Retirement Account (IRA). This is because these plans are not considered “Qualified Plans” under the Employee Retirement Income Security Act.
There are important decisions to make when it comes to planning for a QDRO. A mistake during this process could be costly, especially if it results in the transfer or early withdrawal from a pension or retirement plan. A Dekalb County lawyer can provide sound advice when it comes to distributing these funds through a Qualified Domestic Relations Order.
The property division aspect of divorce is often challenging. This is especially true when spouses have retirement plans that must be distributed equitably.
If you are worried about the financial consequences of liquidating your retirement after divorce, now is the time to seek help. A Dekalb County Qualified Domestic Relations Order lawyer can help you protect your future.