How to divide retirement accounts in a divorce
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How to divide retirement accounts in a divorce

| May 27, 2021 | divorce

Marriages in Pennsylvania last varying lengths of time and throughout the marriage couples will buy various assets and grow various financial accounts. Couples may acquire many assets depending on the length of the marriage and the amount of money they earn throughout the marriage. Their various financial accounts may significantly increase in value as well. During the marriage the couple will be able to both enjoy the assets they own and use the money in the various accounts. If they divorce though all the marital assets will be divided.

How the assets will be divided can be complicated. Couples may need to have homes appraised, businesses appraised, determine the value of vehicles, have artwork and collectables valued and split the amounts in their financial accounts. For many accounts, it can be fairly easy to simply take a certain amount out and give it to the other spouse. However, it is not that easy when couples are dividing their retirement accounts.

Basics of a qualified domestic relations order (QDRO)

Because many retirement accounts such as a 401(k) contain pre-taxed funds, they are governed by ERISA. This federal law requires qualified retirement accounts to be separated by a special order known as a qualified domestic relations order, which directs the plan administrator to give retirement assets to an alternate payee who is the other spouse in divorces. This can be done without the receiving spouse or paying spouse needing to pay early withdrawal penalties if the retirement assets are transferred to another qualified retirement account.

There many couples who have retirement accounts. If they go through a divorce the amounts in those accounts that was acquired during the marriage will be divided. Determining the amount that a spouse may receive depends on how much was acquired during the marriage. This can be complicated though as spouses may have started the accounts prior to the marriage and they may contain separate and marital funds. Experienced attorneys understand how complicated dividing retirement accounts can be and can guide one through the process.