One of the most important roles the family courts play in a Pennsylvania divorce is managing the division of the assets that the couple shares. The courts will have the authority to split your assets or even order their sale, depending on the assets your family currently owns. An order to sell or refinance your shared marital property is common.
However, just issuing a court order regarding your retirement account could leave you vulnerable to substantial penalties and fees associated with early withdrawal from an account with tax benefits. There is a special process that the courts must follow in order to protect divorcing couples from losing retirement assets unnecessarily due to the division of retirement funds in a divorce.
Qualified Domestic Relations Orders create a penalty-free division of retirement accounts
A Qualified Domestic Relations Order (QDRO) is a document that the courts issue when they determine how to split your retirement account. The QDRO instructs the professional who manages the account to create a second account in the other spouse’s name and deposit a specific percentage of the original account into this new, second account.
Provided that the spouses complete the division in a timely manner and the plan administrator follows the instructions outlined in the QDRO, the QDRO usually prevents the couple splitting their retirement assets from incurring financial penalties. A QDRO can also help divide a pension, depending on the structure of the pension plan.
If you have retirement assets that you expect to share with your ex as part of the divorce, you can anticipate that a QDRO will play a role in the final outcome of your divorce.