Issues Surrounding the Division of Retirement Plans in a Divorce
When it comes to property division after a divorce, the question often arises as to what portion of the divorced couple’s retirement accounts is each spouse entitled to receive. These retirement accounts can consist of a number of financial instruments such as employer-sponsored retirement savings accounts (401(k)s or 403(b)s, Individual Retirement Accounts (IRAs) or defined benefit pensions.
With many middle and upper middle income families, these retirement accounts are the largest assets in terms of monetary value in the marital estate. This category of family law can be particularly complex due to the extensive and complicated rules that apply for the division of these accounts and tax requirements, etc. In order to negotiate fair terms of the division of these assets it is important to obtain the services of an experienced Franklin property division attorney. Your attorney may even hire an outside expert to develop the orders that divide these retirement accounts.
Typical division of retirement funds
Typically, a divorced spouse will receive 50% of the marital portion of these retirement accounts. To be specific, your spouse will normally receive on -half of the increase in value of the retirement accounts in the marriage (the accrued benefit) from the date of the marriage until the judgment of divorce is entered.
As an example, if a couple was married for 15 years and a spouse participated in the pension plan for 15 years prior to the marriage up until the divorce – 30 years total – the other spouse would receive 50% of the benefits accrued over that 15 year period of the marriage, but not any percentage of accrued benefits prior to the start of the marriage.
Enter QDROs
A Qualified Domestic Relations Order (QDRO) must be entered in order to divide a retirement account that is identified as a qualified plan by the Internal Revenue Code. These qualified plans are plans from private companies. Government-sponsored plans are to be divided through an Eligible Domestic Relations Order (EDRO). The QDRO directs the administrator of the plan (the spouse’s company) to pay out a portion of the funds in the plan to the other spouse.
Division of non-qualified retirement plans
Certain non-qualified plans may or may not be subject to division. Examples of non-qualified plans are Roth IRAs, traditional IRAs, and SEP IRAs. These plans do not require the drafting of a separate court order in order to be divisible.
The issues mentioned above are among the few that can occur when dividing retirement assets during a divorce. Various exceptions to these rules are available. It is vital to have a seasoned family law attorney who handles retirement account division in divorce cases in order to ensure you obtain the proper share you are owed of the marital retirement assets.
Related Content: QDROs: What You Need to Know
At the Law Offices of Adrian H. Altshuler & Associates, we are committed to helping you achieve a fair and equitable distribution of your marital assets, making sure you are not shortchanged in that process. Our property division attorneys can represent your interests and concerns in these matters after a divorce. To arrange a consultation, call us today at 615.977.9370 or complete our contact form. Our team is here to serve you from our offices in Franklin, Brentwood, and Columbia Tennessee.