Dividing 401k and Pension Accounts in Divorce with Qualified Domestic Relations Orders

Retirement 401k accounts and pension plans are often some of the most significant marital assets that have been acquired during a marriage. These assets are held in just one spouse’s name, but they are marital assets that may need to be divided between the parties in a divorce. If you are concerned that retirement accounts cannot be divided, or that if they are divided there will be penalties, be assured that the accounts can be divided and penalties can be avoided when a Qualified Domestic Relations Order to divide the account is prepared for your case. Also, be assured that retirement accounts can be divided with a Qualified Domestic Relations Order in way that the other spouse will not get more than their fair share.

A qualified domestic relations order, QDRO for short, is a court order that grants a spouse a right to a portion of the retirement benefits that were earned during the marriage by his or her spouse. When your attorney is drafting your QDRO, the spouse who earned the benefit will be referred to as the “participant” and the spouse designated to receive a share of that benefit will be referred to as the “alternate payee.” A QDRO may award benefits to the alternate payee while the participant is living, and may also award certain survivor benefits to the alternate payee if the participant dies.

It is important to note that a domestic relations order does not become “qualified” until it has been approved by the company that manages that retirement plan; this will be referred to in your QDRO as the “Plan Administrator”. The fact that a domestic relations order has been signed by a judge is not sufficient—it then must be submitted to the Plan Administrator for approval before any funds will be divided. If a domestic relations order is not drafted properly, the Plan Administrator will not accept it and will not divide the retirement account. For this reason, it is critically important that your QDRO be carefully prepared to ensure that your rights are properly protected.

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