Brentwood Division of Retirement Assets Attorney
Ending a marriage is rarely a simple process. Besides the emotional upheaval that they face, couples must also grapple with the division of everything from real estate to personal possessions. Of these assets, retirement accounts often prove to be the most difficult to divide, as doing so requires the creation of a Qualified Domestic Relations Order, or QDRO. To learn more about this process, please reach out to our dedicated Brentwood division of retirement assets attorneys today.
Dividing the Marital Estate
Couples who decide to divorce will need to divide their marital assets, or assets that were acquired after the marriage took place. This rule even applies to property that is in only one spouse’s name. A 401(k) plan, or other retirement account, for instance, can still be divided upon divorce, despite being held in one party’s name. However, this can only happen if the parties obtain a QDRO.
What is a QDRO?
QDROs are court orders that establish a non-account holding spouse as an alternate payee on a 401(k) plan. Basically, these orders, which must be approved by the plan’s administrator, grant an alternate payee the right to a portion of the retirement benefits earned by a former spouse. For example, a QDRO might pay out half of the value of an account to the designated payee. These funds could then be rolled over, or transferred into, an IRA for the recipient.
Who is Responsible for Obtaining a QDRO?
In most cases, it is the beneficiary spouse, or the party attempting to collect a named spouse’s retirement benefits, who will need to contact a lawyer to draft a QDRO, although some retirement plan administrators have standardized forms on hand. Completing this form requires certain information, including:
- The contact information of the participant and alternate payee;
- The name of each retirement plan that the QDRO will cover;
- The dollar amount or percentage of the participant’s benefits that will be paid out to the alternate payee;
- The commencement date and the number and type (i.e. lump sum or installments) of payments;
- What will happen to the assets in the event of the participant and payee’s deaths; and
- What will happen if the plan is terminated.
Once completed, this form must be submitted to the administrator, who will then approve it and submit it to the court.
Benefits of a QDRO
A non-account owner who fails to obtain a QDRO will be unable to collect any distributions from that account. Inaction also comes with consequences for account holders, who could end up being assessed taxes and penalties on any distributions. If, on the other hand, the spouse making the payout properly completes the QDRO, he or she won’t face an early withdrawal penalty for transferring the funds.
Do You Need Help Dividing Your Retirement Assets?
If you and your spouse have decided to divorce and you have questions about the fate of your retirement accounts, please reach out to the dedicated Brentwood QDROs/division of retirement assets lawyers at Beal, Nations & Crutcher by calling 615-861-2304 today.