The division of retirement assets in a divorce is a complex matter that requires special considerations. You can’t just look at the total on the most recent statement and go off that. One of the primary things that you need to determine is whether the retirement accounts are covered under your prenuptial agreement. If you have one, you need to review it to find out the terms. If you don’t have one or if retirement accounts aren’t covered, you will have to determine how to divide them.
When certain retirement accounts are split because of divorce, you need to draw up a qualified domestic relations order, or QDRO. This document must be approved by the court and sent to the plan administrator, who must also approve it before it can be executed.
The document will include a variety of information, including the person to whom the payment will be made. The method of the split, such as whether it’s calculated by a set dollar amount or a percentage, is also included.
With a QDRO, you have the option of having the assets transferred to another plan or handed over to you directly. You’ll still be required to pay normal taxes on any direct payments you choose to receive.
Many factors can impact what you’ll receive from splitting the retirement accounts. The value of the account, as well as when the benefits were accumulated can play a role in this. Because this is such a complex area of the law, it’s usually best to have an attorney on your side who’s familiar with QDROs and splitting up retirement accounts.