Divorce and Retirement Assets
There are many parts of a marital estate that needs to be divided in a divorce, both assets and debts. There is often much debate over the estate, such as who will get the family home, who will get the bedroom furniture, the credit card bills, etc. One of the marital assets that often ends up in a tug of war is the assets a couple has set up in anticipation of their retirement someday. Whether the couple has already retired, close to retirement, or are years away from retiring, these assets are part of the marital estate that becomes part of the final divorce agreement.
Since marital property is considered any property that is acquired through the course of the marriage, pensions and retirement accounts fall under this umbrella. The divorce laws of your state will determine how these assets should be divided, whether you live in a community property state or an equitable division state.
The most common types of retirement accounts are defined benefit and defined contribution plans. Defined benefit plans are pension plans in which an employer makes contributions based on the salary of an employee and how long the employee worked for them to determine how much their pension will be. A defined contribution plan is one that a private employee may off where an employee contributes a percentage of their paycheck each pay period which cannot be immediately accessed. Instead, these funds are meant to be used when the time comes that the employee retires.
Qualified Domestic Relations Order
Because there are such stringent rules when it comes to pensions and retirement accounts, there are steps that need to be taken when a retirement account will be divided as part of the divorce settlement. The law requires that a qualified domestic relations order (QDRO) be filed when retirement assets are to be divided in a divorce.
The QDRO instructs the administrator of the pension plan or retirement account to pay the portion of the funds in the spouse’s account to the ex-spouse at a later date. That percentage will be determined by the court and is usually based on how long the couple was married and other assets the couple had.
If the spouse is a government employee and their pension plan is overseen by the state government, there may be a different type of QDRO that will have to be filed. Your divorce attorney will be able to instruct you on the correct documents needed.
Contact a Divorce Attorney for Assistance
Divorce can be complex, and the more assets a couple has, the more complicated it can get. A divorce lawyer in Rockville, MD, such as from the Law Office of Daniel Wright, understands how overwhelming these financial matters can be when you are already dealing with the emotional impact of the end of your marriage.