Can a Divorce Affect My Retirement Funds?
Divorce can be very challenging not just emotionally but financially as well. You will have to make a lot of decisions regarding the division of your assets and property, which includes your retirement funds. In most cases, retirement savings are among the most sizable assets that married couples own. This also means that they are usually a huge issue when the couple decides to get a divorce.
How Are Retirement Funds Divided in a Divorce?
Splitting up retirement funds can be among the most difficult assets to divide in a divorce because of the tax implications. Unfortunately, this means that they are not usually handled properly.
If your spouse’s retirement plan is employer-sponsored, such as a pension plan or 401(k), a part of the plan’s balance is yours by law, unless you don’t have a prenuptial agreement that states otherwise. Keep in mind that this also applies to you, which means that you must give your spouse their share of your employer-sponsored retirement plan funds.
If the primary earner in your marriage is your spouse, how can you make sure that your share of the retirement funds will be protected? Your spouse’s employer can very easily pay out the funds to your spouse instead of you. This is where a Qualified Domestic Relations Order can come in handy as the solution under these circumstances.
What Exactly is a Qualified Domestic Relations Order?
A QDRO is basically a court judgment, decree, or order related to property rights, alimony, or child support. It can order your spouse’s qualified retirement plan on how the retirement benefits must be paid out to you. Do not assume that your legal rights to your share of the retirement benefits will be covered because your divorce decree indicates that you are entitled to them.
A QDRO will protect you and make sure that the marital settlement doesn’t let the funds in the retirement account be withdrawn absent a penalty and then deposited in your retirement account. However, a QDRO only applies to retirement accounts that are covered by ERISA (Employee Retirement Income Security Act) and are IRS (Internal Revenue Service) tax qualified. A QDRO does not apply to government or military retirement plans, which are governed by different laws.
Can I Keep My Retirement Funds?
You can keep your retirement funds if you and your soon-to-be ex-spouse can agree on a settlement that prevents your retirement funds from being divided and kept under your own name. You also have the option of cashing out the share of your spouse as part of their divorce settlement. Likewise, you can agree to swap community property with an equal value to your spouse’s share of the funds.
Consult with a Skilled Divorce Lawyer in Fort Worth Today
If you’re getting a divorce and are concerned about what will happen to your retirement funds or how they will be affected by the divorce, contact The Law Office of Kyle Whitaker. Schedule your consultation with our Fort Worth divorce lawyer by calling 817-332-7703 or reaching us online.