Retirement investment accounts often make up a large percentage of a couple’s wealth. If you or your spouse has a traditional IRA, Roth IRA, or a qualified plan such as a 401k or pension, you will likely need to divide the account if you get a divorce.
Dividing personal IRA accounts is relatively simple, but dividing a qualified plan is more complex. You must meet specific legal requirements, which makes it important to consult a knowledgeable division of assets attorney to ensure the transaction is handled correctly. A Roswell Qualified Domestic Relations Order (QDRO) lawyer understands the legal steps required to safeguard the retirement money a divorce decree entitles a former spouse to receive. Reach out to our team today to learn more.
The federal Employee Retirement Income Security Act (ERISA) erects numerous protections to ensure workers who paid into employer-sponsored retirement plans have access to their money. The account owner designates one or more beneficiaries to inherit the funds if they die before using all the money in the account. ERISA bars a plan administrator from releasing funds to anyone except the account owner or, upon proof of the owner’s death, a beneficiary. This means that even if a spouse is entitled to a portion of the assets accumulated in an account during marriage, they would not have access to it.
The only exception is if the plan administrator receives a Qualified Domestic Relations Order instructing them to distribute some or all of the funds to someone else. Each pension or 401k administrator can decide what it requires in a QDRO. A Roswell attorney can research the specific plan’s requirements and draft a QDRO that enables the plan administrator to distribute the funds in accordance with a divorce decree.
Without a QDRO, the account owner retains complete control over the funds in the account. This means a spouse could remove money from the account and potentially deprive the other spouse of the retirement benefits the divorce decree allocated to them. A QDRO prevents that from happening, which is why it is critical to submit the proper documentation for one as soon as possible after a divorce.
A QDRO also offers tax advantages. The account owner must pay taxes on anything they withdraw from a qualified retirement account. If a former spouse withdrew a sum and paid it as a part of a property division settlement, they would need to pay taxes on the withdrawal. With a QDRO, the fund administrator pays the money directly to the intended individual, which means the other spouse never handles the funds and has no tax liability. A Roswell attorney can answer any questions divorcing spouses have regarding the benefits of having a QDRO in place.
Each pension or 401k plan offered by the area’s major employers has its own requirements for a QDRO that a Roswell attorney is likely familiar with. When a couple decides on a property division arrangement or a court imposes one, our team of legal professionals can draft an initial document. The spouses must both sign it before submitting it to Georgia courts.
If the judge agrees that the draft QDRO reflects the agreement in the divorce decree, they will certify it. The attorney will then file the certified QDRO with the plan administrator to ensure that it complies with the plan’s specific requirements. If it does, the administrator will “qualify” the document, and its terms will go into effect.
Technically, a couple could file a QDRO any time after a divorce and before the receiving spouse reaches retirement age. However, filing immediately is preferable, as doing so protects the receiving spouse’s share.
If you are getting a divorce and the property division settlement entitles you to a portion of a qualified retirement plan, make sure you ask about a QDRO. It is easy to overlook this step, but filing for one is critically important.
A Roswell Qualified Domestic Relations Order lawyer understands you need the protection a QDRO provides. Reach out to our qualified team today, so we can start protecting your assets.