One thing that some divorced couples have to think about is retirement accounts. This is sometimes a huge consideration, but since they are only in one person's name, it takes a special order to get this transferred to the other party if this is part of the divorce settlement.
When a retirement account's funds need to be disbursed to another person besides the account holder, you need to get a qualified domestic relations order (QDRO). The QDRO is a complex order that has to be carefully considered, so make sure that you work with someone who understands these.
The QDRO is a court-issued document. It is typically handled at the end of the property division process when the court approves the division. This order is required when a retirement account made under the Employee Retirement Income Security Act is going to be paid to someone other than the accountholder.
There are many points that are covered in the QDRO. The amount or percentage the account for each payment, the number of the payments and similar points must all be covered in the order. A copy is provided to the plan administrator so that it can be followed.
Typically, the plan administrator must approve a QDRO as long as it meets the requirements. A transfer or retirement funds that is made due to a QDRO won't incur penalties, even if the transfer occurs before retirement age.
Retirement accounts are only one thing that you should think about when you are getting a divorce. Make sure that you look at the entire property division settlement to determine how it might impact your future.
Source: FindLaw, "What Is a QDRO? How Divorce Affects Retirement," Andrew Chow, Esq., accessed Aug. 03, 2017