Florida residents who are seeking a divorce may wish to know more about how retirement accounts are handled during the split. If the account is considered marital property, it could end up being evenly split between the couple.
When a court divides a couple’s property during a divorce, a retirement account, such as a 401(k), may be considered marital property. The court will issue a Qualified Domestic Relations Order, or the party may be able to provide one themselves, which dictates how a 401(k) will be divided. The 401(k) will then partition the account, giving control of a portion of it to the former spouse. The spouse may take the entire portion as a lump sum, but this will bring with it a large tax bill due immediately. Another option is to wait until retirement to begin drawing from the fund.
A QDRO must contain certain information in order to be valid. For instance, it must identify the names and addresses of the primary and alternate payees, the specific plan that it applies to and the percentage of the funds diverted to the alternate payee. The plan administrator must determine the validity of the QDRO and notify the primary payee on the account within a certain period of time. The plan administrator must also keep separate accounting of the alternate payee’s funds within the 401(k).
Understanding the implications that a divorce may have on a person’s property, including retirement accounts, may be difficult without the assistance of an attorney. An attorney may be able to guide a person through the divorce process, from filing to settlement, and may also represent the person in court or during the settlement negotiations, seeking a fair resolution to a complex asset division.
Source: 401k.org, “401(k) and Divorce”, December 24, 2014
