If you are going through a divorce, you are probably experiencing a lot of difficult emotions. Besides the emotional turmoil a divorce causes, the legal process can be just as challenging to navigate. One of the most complex undertakings in a divorce is dividing the couple’s retirement or pension funds. Any money saved for retirement during a marriage is the property of both spouses.
A Marietta Qualified Domestic Relations Order (QDRO) lawyer can help ensure a smooth transfer of retirement or pension funds after your divorce is finalized. A QDRO order allows you to share in the proceeds of your former spouse’s pension or retirement account post-divorce. A defective QDRO could cause you to lose a lot of money, so make sure to work with a property division attorney experienced in drafting legally viable orders.
The federal Employee Retirement Income Security Act governs many, though not all, retirement funds and pension plans. Funds cannot be paid to anyone other than the account holder or plan participant, absent a court order. A QDRO is a court order that permits a pension manager or fund administrator to pay a portion of an individual’s retirement benefits to their former spouse. The other spouse in this context is called an “alternate payee.”
The laws governing QDROs can be difficult to understand, making it even harder to draft a comprehensive and legally enforceable document. Having a qualified Marietta attorney draft the QDRO on your behalf can help ensure that the order meets all legal requirements and properly reflects your intent. Since the decision on how to divide the account funds is made before the judge issues a final divorce decree, a lawyer must wait until after the divorce is final to draft and file a QDRO.
Putting money in a pension fund or retirement account allows an individual to take advantage of certain tax breaks. If they take money out of those accounts early – before age 59 ½ – the IRS will take 10 percent of the proceeds as a penalty and tax the withdrawal as income. These taxes could eat up a big portion of an alternate payee’s distribution.
A capable attorney serving the Marietta area can help you avoid tax penalties by carefully structuring the way you receive the funds through a QDRO. For example, the money could immediately rollover into a tax-deferred retirement account, where it would stay until the alternate payee reaches retirement age. The funds might stay in the former spouse’s pension plan, to be paid to the alternate payee when they reach the age of eligibility. There could be other solutions, depending on your particular circumstances.
When negotiating a divorce settlement, securing an appropriate portion of the retirement savings you built with your former spouse during your marriage is of critical importance. Don’t let hasty decisions and impulse keep you from collecting what you’re entitled to receive. Instead, use a QDRO to protect your funds from tax consequences associated with early withdrawal.
A Marietta QDRO lawyer can help ensure that you have the means to retire when you planned. Contact our intake team today to schedule an appointment.