Dividing property and money during divorce can be daunting. You must not forget about the proceeds of your retirement plan. Your retirement account may hold a significant amount of wealth. Separating your retirement funds requires careful consideration and a unique process of obtaining a qualified domestic relations order (QDRO).
If you do not divide your retirement plan properly, you may face serious tax consequences. Keep reading for a quick guide to dividing your retirement assets with a QDRO.
The basics of a QDRO
First off, you will need to know what a QDRO is. A QDRO is a document that establishes the right of a spouse to receive a share of the other spouse's retirement benefits. The order names the receiving spouse as an alternate payee and describes how much and how many payments the payee will receive.
Drafting a QDRO
Before completing and submitting a QDRO by yourself, you should certainly seek legal counsel. This significant legal agreement must pass court approval, and even minor errors may get you in trouble. You can generally obtain the document via your plan administrator. If nothing else, you should have an attorney review the QDRO before either of you sign it.
You might be wondering why the word "qualified" is in the name of this document. This is because a QDRO has certain restrictions. It can divide only qualified plans. These plans include 401(k)s and 403(b)s. If you do not have a qualified plan, you may have to go through a different court order.
Knowing how to divide your retirement funds through a QDRO sets you up for a smoother process. It can be complex, so you will likely still have questions about your specific arrangement. If you need more guidance about handling your retirement plan during divorce, make sure you contact a family law attorney.