Retirement accounts can hold a significant percentage of a couple’s assets. If the couple decides to divorce, they often must divide the account to satisfy the state’s requirement for an equitable distribution of marital property.
Federal law governs many of these accounts and creates some additional administrative hurdles. Your seasoned division of assets attorney must take some additional steps in these cases, or you might not receive access to the money as agreed. A Sandy Springs Qualified Domestic Relations Order (QDRO) lawyer can manage these technicalities timely, ensuring that all is in order as quickly as possible. Reach out to our firm today to learn more about protecting your assets during a divorce.
Generally, any contributions either spouse makes to a retirement account while married is considered marital property. The account’s increase in value during the marriage is also marital property, even though only one spouse is the account holder. The account holder’s contributions before marriage are usually considered separate property.
Employer-sponsored pension plans and 401k accounts are subject to the Employee Retirement Income Security Act (ERISA). Traditional Individual Retirement Accounts (IRAs) and Roth IRAs are not. If a couple’s retirement funds are all in IRAs, dividing them is relatively easy. One spouse transfers a portion of the account to the other spouse’s IRA. If handled in this manner, neither the donor nor the recipient owes tax on the transaction.
However, if either party has a 403b or 401k account, which are governed by ERISA, they will need a Qualified Domestic Relations Order to divide them. A Sandy Springs QDRO attorney can review holdings during the property division negotiations to determine which accounts are subject to ERISA, if any.
A person with an employer-sponsored retirement account holds the account in their name and designates a beneficiary to receive the funds if they die. ERISA prohibits a fund administrator from paying from these accounts to anyone other than the account holder or the designated beneficiary.
When a couple divorces, the spouse who does not own the account typically receives a portion. Depending on the couple’s agreement, the non-account owner might receive the funds in a lump sum or installments. Typically, the non-owner can only access the money when they reach retirement age. The fund administrator cannot disburse money from the account to the non-owner without a QDRO.
High-net-worth couples often have significant sums in retirement accounts, and dividing them requires a sophisticated analysis of vesting rules and tax implications. A QDRO tailored to an individual’s unique circumstances can ensure the plan administrator handles the funds as agreed.
Both parties must sign a draft QDRO and submit it to the divorce court for certification. When Georgia family court certifies that the agreement reflects the order in the divorce decree, a Sandy Springs attorney can submit the signed and certified document to the fund administrator. This individual has 180 days to accept or “qualify” the document. If the administrator qualifies it, the certified court order becomes a QDRO, which governs the disposition of the funds in the account.
Once the QDRO is in place, the owner cannot access funds designated for the former spouse’s benefit. To avoid taxes and penalties, individuals can arrange for the fund administrator to transfer a portion of the funds into the receiving spouse’s IRA account.
If you and your spouse accumulated assets in retirement accounts, you are probably relying on them to help maintain your standard of living when you reach a certain age. If the fund administrator requires a QDRO and you do not file one, your share of the funds could be at risk.
A Sandy Springs Qualified Domestic Relations Order lawyer can ensure that you emerge from your divorce with all the rights you have negotiated. Schedule a consultation with a qualified team member today to get started.