Can My 401(k), Retirement Accounts and Pension Be Divided by the Court in My Divorce?
Many people have strong feelings about their retirement benefits. They may have worked for a company for many years before earning a pension or relied on their employer’s contribution to help fund their 401(k), which may make them feel very possessive of these funds. While you may think that because your retirement account only has your name on it, that it is yours only and not subject to being divided in a divorce, but this is usually not the case.
Georgia is an “equitable distribution” state, which means that when a couple gets a divorce, their marital property is divided “equitably,” which does not necessarily mean an even 50/50 split. Courts consider many factors when determining how to split property. Any contributions that either spouse made to a retirement account (even if it was only in their name) during the marriage is usually considered marital property that is subject to division. Any balance of the account before the marriage is usually considered separate and may not be subject to divisions between the couple upon divorce.
To divide your or your spouse’s retirement account (and to avoid taxes and early withdrawal penalties), you may need a qualified domestic relations order (QDRO) to carry out the transfer.
What Is a QDRO?
A QDRO is a special court order that requires the administrator of a retirement plan to use a portion or all of the plan to pay child support, spousal support, or marital property to a spouse, former spouse, or dependent of the retirement plan participant. The QDRO is a separate order from the divorce decree or other orders in the divorce case. It effectively changes and splits ownership of the funds in the retirement account.
The QDRO must contain specific information, including:
- The name of the retirement plan participant
- The name of the spouse (the alternate payee)
- The last known mailing address for each of these individuals
- The amount or percentage of benefits to be paid to the alternate payee
Why Do I Need a QDRO?
Federal law requires a QDRO to divide qualified retirement plans, including any of those subject to ERISA. If a state court issues an order for the division of a retirement account, this may not be sufficient to force the retirement plan administrator to transfer a portion of the retirement proceeds to the alternate payee, so this separate order is often necessary to divide the account properly.
Additionally, having a QDRO in place can help you avoid the typical early-withdrawal penalties associated with taking funds out of your retirement plan before reaching the age of 59 ½ since you are only transferring funds because of divorce.
In some cases, you may not need a QDRO. For example, if you and your spouse have your own retirement accounts of about equal value, you may agree to simply keep your own account. Also, certain types of retirement accounts can be divided without a QDRO. In other situations, the judge may adjust the property division or award spousal support instead of dividing a retirement account.
Process of Using a QDRO
When you get a divorce in Georgia, you must disclose the assets that are subject to division. This includes retirement plans. Each retirement plan has its own rules regarding QDROs. Many have their own forms that they use for this purpose. Your Atlanta divorce and family lawyer can contact the plan administrator and request the necessary forms. If the plan does not have a specific form for this purpose, your Buckhead family attorney can prepare an order with the necessary information. The plan administrator must approve the order as part of the process.
The plan administrator determines the value of the retirement account before marriage and the value as of the date of the division of the account. The QDRO may also provide information about survival rights if the account owner dies while there are funds in the account.
A QDRO should be requested during the divorce process and completed as a condition of the divorce. Additionally, it Is important that the spouses state that they are making a tax neutral transfer to a qualified retirement account of the recipient spouse in order to avoid potential tax penalties.
Contact a Knowledgeable Atlanta Divorce Lawyer for Help
If you would like assistance in drafting your QDRO or advice on how to split your marital property, the knowledgeable lawyers at Buckhead Family Law can help. Complete our online contact form or call Buckhead Family Law at (404) 600-1403.