Some people may not realize that money they put into a retirement account, like a 401(k) or IRA, during their marriage is not theirs alone. When the marriage ends in divorce, those retirement funds will likely need to be split just like every other asset and debt the couple has acquired while they were married. In order to avoid paying large fees on a retirement plan withdrawal, the couple will likely need a QDRO (qualified domestic relations order). An attorney can help walk the parties through the process, as it can get a little bit complicated.
What is a QDRO?
A QDRO is an official decree, which must be approved by a judge, that orders one party to transfer funds from his or her retirement plan to the other divorcing party. Information that must be included in the QDRO includes the plan participant’s name and either a specific amount or percentage of the benefits that are to be paid to the other party.
The party who is receiving the funds must then receive the money as if he or she was the owner of the plan. Then the payee may use the money as needed, which will result in taxes charged to the receiver of the money, or he or she may roll it over into another plan, which makes the transaction tax-free.
The payee may also use part of the money and roll over the rest. It all depends on the needs of the party who is receiving the funds. This is the case, at least, when the QDRO involves transferring money to a spouse or former spouse. However, if the person being paid is a child or other dependent, the participant of the plan will be taxed for the withdrawal.
How Are Retirement Plans Split in Divorce?
The amounts and percentages given to the other divorcing party will depend on the individual case. Everything is not always split 50/50, as there are many variables involved, like the incomes of both parties, any pre-nuptial or post-nuptial agreements that may be in place, etc. An attorney can help sort through the numbers to come up with fair amounts.
Contact an Experienced Elmhurst Divorce Attorney Today
If you are facing divorce, the attorneys at Weiss-Kunz & Oliver, LLC, can walk you through the process of filing a QDRO and much more. A knowledgeable Oak Park divorce attorney could make all the difference in your case. Call 312-605-4041 to set up a consultation today.