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Using a QDRO to split pension plans during divorce

With the advent of social media sites such as Pinterest, it seems that many people in New Hampshire and other areas of the country have an increased interest in completing certain tasks themselves, as opposed to hiring a professional who could do it on their behalf. The goal behind doing it themselves may be to save money. However, many have found that failing to consult a professional regarding certain aspects of a divorce could ultimately lead to more expenses.

For example, some in New Hampshire choose to divide their assets on their own. While it is certainly admirable that some divorcing couples are able to come to such agreements without involving attorneys, splitting a retirement account without a qualified domestic relations order can be costly. Some professionals claim that they are only asked to become involved in the process when couples need help rectifying their mistakes.

For one couple, the spouse with higher earnings had a 410(k) valued at $250,000. When the couple tried to split it, they incurred approximately $110,000 in fines -- $85,000 in taxes and a $25,000 early withdrawal fee. A QDRO could have eliminated these costs. Some professionals advise about the importance of settling a divorce only if QDRO paperwork is ready at the same time; if the spouse who owns the asset dies before proper paperwork is in place, the surviving spouse would not receive anything.

Once a couple makes the decision to divorce in New Hampshire, they are often eager to begin the next stage of their life. However, ensuring that appropriate paperwork is in place can help prevent costly mistakes. Experienced professionals can help couples fully understand the implications of their actions and the decisions they make.

Source: Reuters, "Your Money: Splitting retirement accounts is tricky for DIY divorce", Beth Pinsker, Nov. 6, 2017

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