Many couples begin the divorce process without taking into consideration the issue of their retirement savings. It might not enter their minds that an asset like that could be considered marital property. Find out more by reading on.
How Marital Property Affects the Divorce
If you were to make a list of property acquired after the date of the marriage, you would have a good idea of how much marital property will be at stake in your divorce. However, some marital assets are trickier to evaluate when it comes to value. After all, some couples intermingle marital and separate property all the time. This is especially an issue with long-term marriages. One form of marital property should not be ignored. Retirement accounts, like a 401(k), are marital property.
Qualified Domestic Relations Order (QDRO).
Don't be thrown off by the confusing name. This type of order should be part of your divorce if you or your spouse owns a certain type of retirement account. Here is what to know about the QDRO, divorce, and marital property:
- The name on the retirement account and the party that added the funds through their employment does not affect the account's inclusion into the marital property bucket. For instance, if one party worked and the other did not, all funds added to the account from the date of the marriage onward are considered marital property.
- Not every type of retirement account is subject to a QDRO. Speak to your divorce lawyer about your own retirement assets. Commonly, most 401(k) type accounts can be subject to a QDRO.
- QDRO orders must be issued before the divorce is final. Since it can take time for the paperwork to process, don't delay in getting things started.
- In most cases, employees can withdraw funds for various reasons from retirement accounts. However, they must often pay penalties when they do so. Using a QDRO to withdraw funds does not incur penalties. However, the recipient must invest the funds into a qualified retirement account before Tax Day because the disbursal could be taxed as income.
- Finally, the funds in a qualified retirement account subject to QDRO rules are only one part of the entire marital settlement agreement. That means the funds should be considered when deciding on marital debts and property. The judge will view the QDRO funds as part of the divorce agreement.
To find out more about how a QDRO can affect your divorce, speak to your divorce lawyer.