Don’t Let Financial Divorce Mistakes Ruin Your Retirement
Going through a divorce doesn’t need to take its toll on your finances. As soon as possible, you should take inventory of your assets. One of the most important areas of concern is your retirement plan. Many people regrettably ignore this area of their finances, especially when retirement is a long way off. Don’t let financial divorce mistakes ruin your retirement.
Obtain Details about Your Retirement Plan
It is necessary to get specific details about your retirement plan. Find out the specifics of the plan both at the time of your marriage as well as on the date the Respondent to your divorce was served with the Petition for Dissolution. This information may sometimes be difficult to obtain, so it is best to request it as soon as possible. If you have more than one retirement plan, gather information regarding all accounts.
Calculate Your Retirement Contribution during Marriage
The amount of money that you contributed to your retirement fund during your marriage may need to be considered part of your marital assets. If your spouse has a plan, it may also be part of your joint assets. In some cases, you will have to determine the amount that was paid into the fund prior to your marriage. This amount should be exempt from marital property.
Understanding the Qualified Domestic Relations Order
The Qualified Domestic Relations Order (QDRO) is an order that must be included as part of your divorce in order to divide retirement assets such as 401(k) plans without being subject to taxes and penalties. The QDRO establishes the right to receive a portion of your spouse’s retirement plan. This must be in place because the money is not available to you until you are of eligible age.
How the QDRO Order Works
The QDRO must be provided to the Plan Administrator so that they know to separate funds to your spouse. When receiving funds from an account, the spouse may be allowed to rollover their portion into their own account, if they have one. This is one way to avoid paying immediate taxes on the money. It is very important that you have a QDRO in place or it will result in the payment of taxes on money that your former spouse receives.
Retirement accounts can create complicated situations in a divorce. Consult with an experienced attorney to review your finances and include a QDRO if one is necessary. Call the legal team at Udall Shumway PLC to schedule a consultation.
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding Financial Divorce Mistakes, or other family law issues, please feel free to contact 480.461.5300, log on to udallshumway.com, or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.