Dividing retirement funds can be a serious divorce matter

On behalf of Stange Law Firm, PC posted in Family Law on Wednesday, March 14, 2018.

Among the most valuable assets that a Missouri couple may share are their retirement funds. In many cases, both parties are depending on these funds for their financial futures. This is one major reason why 62 percent of divorce attorneys surveyed in 2016 said that retirement accounts were the most contentious issue for their clients.

The financial aspects of divorce can often be even more jarring than the emotional challenges. In addition, property division during divorce can often be complicated. This is certainly true when dividing retirement funds as these accounts are subject to a number of specific legal and financial regulations. Failing to adhere precisely to the rules may cost both parties substantial sums in taxes, penalties and unfair allocations.

In order to properly distribute a workplace retirement account, whether it be a traditional pension or 401(k), a court order is necessary. Called a qualified domestic relations order, this document reflects the distribution agreed upon in the divorce settlement but must be drafted and requested from the court. The QDRO should also specify the type of distribution. In some cases, the funds will be rolled over into a new retirement account. Spouses could also receive a direct distribution, but this would require a tax payment.

A spouse who is dividing a retirement account can consult with a family law attorney. A lawyer can provide representation throughout negotiations to protect a client’s assets and financial investments. Furthermore, legal counsel could deal with the practical and legal elements of distributing an account following the divorce.

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