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Dividing your retirement accounts in divorce

The divorce process is often different for couples who are older. Generally, older couples don’t have to worry about custody orders or child support for minor children. However, they may have to divide their retirement accounts. If you’re a California resident, here are some important points to consider when it comes to splitting retirement assets in a divorce.

Rules for dividing accounts

The divorce-related regulations for splitting retirement accounts depend on the account type. The process can be complicated whether you have a pension, IRA, or 401K. You may also face tax complications if you incorrectly transfer retirement funds to an ex-spouse.

You’ll need a qualified domestic relations order (QDRO) to transfer funds from your pension or 401K funds but divorcing couples are not aware of this. The QDRO is issued by a state agency or the court and signifies that the divorcing spouse has a right to receive all or some of the funds in the retirement account.

Dividing retirement assets

There are two methods for dividing retirement funds using a QDRO. The first option is to award a separate interest in the balance of the account. The second option allows divorcing spouses to share in benefit payments. The spouse who owns the retirement account must submit the QDRO to the plan administrator once both spouses agree on the terms of asset division.

It is important to note that IRAs are not subject to the rules of a QDRO. If you want to divide an IRA between you and your ex, the terms have to be clearly detailed in the legal separation or divorce agreement. For the divided funds to be tax and penalty-free, the agreement must specify how much of the account owner’s account balance will go to the spouse.

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Joseph R. Zoucha, Attorney & Counselor at Law
520 Warren Street
Redwood City, CA 94063

Phone: 650-381-9591
Fax: 650-261-9650
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