Franklin Division of Retirement Assets Attorney
Divorces can be complex, primarily because of property division. All marital assets are subject to split, but some assets are harder to split than others. Case in point: retirement plans.
In a divorce, asset division doesn’t automatically extend to retirement plans. That’s because employer-sponsored plans can be paid only to the employee based on the guidelines of the plan. They cannot be split unless there is a qualified domestic relations order (QDRO) in place. Get help from a Franklin division of assets lawyerand other divorce issues with help from the law firm of Beal, Nations & Crutcher
What is a Qualified Domestic Relations Order?
A qualified domestic relations order is a court order. It is a type of domestic relations order that gives another person the right to receive all or a portion of the benefits payable to a participant under a retirement plan. This means that in a divorce, an alternate payee such as a spouse, former spouse, child, or other dependent can receive some of the retirement plan. A QDRO is typically drafted by the lawyer of the beneficiary spouse.
In order to be valid, a QDRO must contain the following information:
- Name and mailing address of the participant
- Name and mailing address of each alternate payee
- Name of each plan to which the QDRO applies
- The portion—the dollar amount or percentage—of the plan to be paid to the alternate payee
- Applicable length of time (the number of payments or time period for which the QDRO applies)
One QDRO covers multiple plans, so this may be good news for you. Also, each QDRO may be different. Although each one must contain certain provisions, the specific content will depend on the type of retirement plan, the benefits involved, and the intent of both parties.
As mentioned above, a QDRO may be paid out by a specific dollar amount or percentage. The amount that is paid out is subject to taxes.
A spouse who receives QDRO benefits must report it and will be forced to pay taxes. If they put the money into a non-IRA account, those funds are subject to income taxes. If the funds are rolled over, or transferred, into a qualified retirement plan, no taxes will need to be paid. The best way to do this is through a trustee-to-trustee transfer. This allows you to transfer funds from one retirement account to another, without the need for the beneficiary to handle the money. It simply goes through the financial institutions of each plan.
If the benefits are paid to a child or dependent, then the plan participant is the one who will be taxed. However, there will be no penalty for early withdrawal if the beneficiary is under the age of 59½.
Contact Us Today
It’s best to not have to split an employer-sponsored retirement plan due to the taxes and other complications involved. If a split is necessary, though, a QDRO is the only way. There is no way around it.
Get help with QDROs and other divorce issues with help from the law firm of Beal, Nations & Crutcher. We’ll make the process easier. Call (615) 861-2304 to schedule a consultation.