Do not ignore retirement and pension accounts when you are getting divorced. If you have many years before you or your spouse retires, these accounts may seem less important now, as compared to liquid assets like checking and savings accounts. As a divorcee, however, you may be entitled to a portion of your ex-spouse's retirement payouts. Unfortunately, too many people get short-changed here.
Tip #1: Be sure the paperwork properly reflects your interest.
This is a must-do - be sure that the divorce decree and settlement documents address your rights and interest in your wife's 401(k) or your husband's pension. Not only should the paperwork address this, it should do so properly.
The Qualified Domestic Relations Order, or QDRO, is generally the document used to specify a particular payout from a retirement plan. In consultation with your attorney, be sure this document does what you need it to do at the time you expect your ex-spouse to retire.
Tip #2: Roll-over QDRO distributions tax-free.
Another reason some people ignore retirement accounts during the divorce process is the tax penalty for early withdrawal, which remains in place until retirement age. Since a 401(k) cannot be made liquid without suffering a hefty tax penalty, the must-know here is that you can often rollover QDRO distributions tax-free, as though you were an employee rolling over your own 401(k) to a new job - another great reason to be sure you have the proper QDRO in place.
Questions? Need advice?
Don't hesitate to get the counsel you need to protect your interests. We are a divorce and family law firm in Denver, handling cases for high net worth individuals throughout Colorado. If you have questions or need advice, call 303-416-5457.