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Retirement Accounts

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Many people with retirement assets, such as IRAs, 401(k)s and pension plans, think the assets are protected during divorce. In most states, if your spouse obtains a Qualified Domestic Relations Order (QDRO), retirement assets are subject to division by the court.

Are Retirement Assets Subject to a Division Between Spouses in a Divorce?

In most states, retirement plan assets may be divided between the spouses according to the divorce laws in your state. The following types of retirement assets are typically subject to division between the spouses: pension and 401(k) plans, government employee retirement plans, military retirement benefits and IRAs. For these accounts to be properly distributed, one party must obtain a QDRO.

What is a QDRO?

A QDRO is an order in a divorce decree or property settlement that gives a former spouse the right to receive all or part of the other spouse's qualified retirement plan benefits. The order requires the receiving spouse to pay the income taxes on those benefits.

What must be Contained in a QDRO?

Under the Internal Revenue Code, a QDRO must contain all of the following elements to be effective:

  • Provide for child support, alimony or marital property rights for a spouse, former spouse, child or other dependent of a qualified retirement plan participant
  • Made pursuant to a state domestic relations law
  • Create or recognize the divorcing spouse's right to receive all or some of a participant's benefits under a qualified retirement plan
  • Specify the following:
    • Contact information for both spouses
    • All retirement accounts the order applies to
    • Amount of money or percentage to be paid
    • Number of payments

The Effect of a Valid QDRO

When the parties obtain a valid QDRO, the spouse that is receiving a share of the retirement assets is taxed on the funds that are withdrawn from the retirement plan account, but the 10% early distribution penalty tax doesn't apply. The receiving spouse can also elect to roll over any distribution into his or her own IRA without incurring income tax. The rollover must be completed within 60 days of the spouse's receipt of the plan distribution.

Speak to a Divorce Lawyer about Retirement Accounts

Learn how to protect your financial future by connecting with a local divorce lawyer. Call 877-349-1310 or fill out a divorce case review form to schedule a preliminary consultation today. Find out what you should and shouldn't include in a Qualified Domestic Relations Order to receive retirement benefits or how you can protect your retirement assets by connecting with a divorce attorney near you. Start to protect your financial future today.

The above synopsis of retirement accounts is by no means all-inclusive and is not intended to provide legal advice. These laws may have changed since our last update and there may be additional laws that apply in your situation. For the latest information on these divorce laws, please contact a local divorce lawyer in your area.