When a Roseland area couple decides to get divorced, they have often gone through a lot to get to this point. A divorce is an emotional time, but it can also cause many financial questions. One of the larger assets a couple owns is their retirement account, which can be in the hundreds of thousands of dollars. It is important to understand how a retirement account is addressed in a divorce settlement.
A pension plan, 401K, or another employer-sponsored retirement account will be part of a divorce settlement unless there is a prenuptial agreement in place. In many cases, a Qualified Domestic Relations Order (QDRO) is created. A QDRO is a court order that can be used to instruct a spouse’s pension plan on how to pay a share of the plan benefits. They cannot be used for military or government pensions. They are also not used for an IRA or SEP assets.
The QDRO needs to be approved by the retirement plan’s administrator and the court. An attorney who specializes in family law has the experience necessary to make sure the QDRO is drafted correctly and that their client’s rights are fully covered. If the retirement plan is a 401K the plan may make an immediate lump sum payout, or they may make periodic payments. A pension plan typically doesn’t start making payments until a person reaches a normal retirement age.
It is important that a person protects their financial future after a divorce. Making sure that all assets are accounted for, and retirement accounts are fairly settled can be critical in protecting a person’s future.