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Video Blog 2012 June 401(K) Divided By Two
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401(K) Divided By Two

Posted By Demetria Graves || 4-Jun-2012

Using the QDRO to make it happen

We discussed earlier about the QDRO—or Qualified Domestic Relations Order—which is the best way in a divorce to split up retirement accounts. But while we talked about what a QDRO is, we'd like to specifically discuss how it applies to allocating 401(K) funds. Because 25% of divorces involve people ages fifty and older, this is a very hot topic in the world of divorce law. We'd like to break down a few of the key points about how it will work to help resolve the account in dispute.

— A QDRO establishes an ex-spouse as a rightful owner to part of an account.
—The documentation needs to be drawn up by an experienced lawyer, then approved by the court.
—It also protects the fund from being hit with taxes and early-withdrawal penalties.
—Each account in contention needs to have its own QDRO drawn up.
—The opening salvo as to how the account is divvied up is given to the divorcing couple. However, if they cannot come up with a figure, then the court will come in and do it for them.
—According to the Wall Street Journal, "A QDRO must spell out the formula to be used to divide the assets—whether each portion should be calculated as a percentage of the balance or a dollar amount and whether investment gains or losses should be shared equally or disproportionately until funds are transferred to a separate account for the nonemployee spouse."

These are just the broader points of how the QDRO works. If you are in a situation where your retirement accounts are possibly up for grabs in a divorce settlement, call me at 626.513.8227 to set up an appointment to further discuss the options available to you.

Categories: Divorce, Property Division

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