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QDROs often useful when dividing divorce retirement benefits

On Behalf of | Jul 1, 2012 | Divorce

Divorce after the age of 50 is becoming increasingly common, and it can be especially complicated to divide up retirement benefits at that stage of life. The entire process comes with various tax considerations and can be mishandled all too easily. For Ohio men and women who have spent much of their lives as homemakers, however, retirement benefits can be complicated to divide but crucial to get right. After all, they deserve to be taken care of in their retirement years the same as the spouse who worked outside of the home.

One important consideration to keep in mind is that, in order for retirement benefits like a 401(k) plan or most pension plans to be divided, a divorce court is going to have to issue a Qualified Domestic Relations Order, or QDRO. Other types of retirement benefits may not require a QDRO. In a QDRO, the retirement benefits plan administrator will be directed how to transfer a specific portion of the retirement benefits to the non-employee. With a QDRO in place, there will not be penalties for withdrawing the amount from the employee’s plan and depositing it in a separate account for the non-employee.

One further consideration is for the non-employee to ensure the divorce is not finalized before completing the QDRO. This will help protect his or her rights and make sure no misunderstandings occur between the employee’s pension plan administrators. This also protects the non-employee in the event the employee happens to die after the divorce is finalized but before the QDRO is completed. In that situation, the employee could be considered single and the retirement benefits may very well not be required to go to the non-employee.

Ohio residents going through a divorce will likely benefit from understanding how retirement benefits are divided in a divorce. A QDRO may well be the best way to protect one’s rights when it comes to retirement benefits acquired during the course of the marriage. Divorce does not have to be overly complicated, and this process will help achieve an equitable distribution of marital assets.

Source: Forbes.com, “How Divorcing Women Should Handle Retirement Accounts and Pension Plans,” Jeff Landers, June 13, 2012

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