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Retirement funds critical part of property division

On Behalf of | Mar 14, 2018 | Divorce

Retirement accounts are often the largest assets held by couples and families in Arizona. Therefore, when a divorce occurs, the distribution of these accounts is of primary concern to both partners. These funds are often critical to the financial health and future of both parties and the subject of some of the most contentious issues in a divorce. In fact, 62 percent of divorce lawyers ranked retirement accounts as one of the most difficult issues to deal with.

Dealing with retirement accounts appropriately during divorce is not limited to working for a fair property division settlement. All of these accounts have different legal and financial regulations that govern how they can be distributed at the end of a marriage. When the distribution is not handled correctly, both spouses could pay the price in excess taxation, fees and penalties. It could even result in an inequitable outcome.

A qualified domestic relations order, or QDRO, is necessary in order to split retirement accounts that are based at the workplace of one spouse. While the content of the QDRO is based on the divorce agreement, the court does not issue this order automatically along with the divorce decree. When multiple accounts are being divided, a separate QDRO is required for each one. These orders are required whether the account is a traditional defined benefit pension or a 401(k). In addition, if possible, the QDRO should specify a division by percentage rather than a dollar amount as the latter can change due to market fluctuations.

The family law attorney that represented one spouse during the divorce can also ensure the proper distribution of assets as part of the property division process. An attorney can have the order approved and issued by the court as well as work directly with the plan administrator of the retirement fund to ensure the division is carried out properly and accurately.

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