When a couple gets divorced, most assets are divided easily. However, when it comes to employer-sponsored retirement accounts, New Hampshire couples have to take an extra step in order to ensure each spouse gets their fair share. A qualified domestic relations order (QDRO) must be issued in order for anyone other than the plan participant to have access to the funds.
With a QDRO, a divorced spouse can get disbursements from their ex’s pension or 401(k) plan. If the plan participant is already retired and receiving monthly checks from the account, the spouse may receive a portion of those funds. In most cases, checks from a shared account end when the retiree dies. However, there may be another option for those who are not yet receiving retirement benefits.
A separate interest account allows an alternate payee, such as the divorced spouse, to have their portion of the retirement funds separated. There are advantages and disadvantages to doing this. While the alternate payee gets to choose when they begin receiving disbursements and gives them the opportunity to cut all financial ties to their former spouse, the participant typically does not receive any funds left in that account if the alternate payee dies first. If the participant expects to outlive their former spouse, they may prefer a shared account because it could allow them to get their full retirement benefit when their former spouse dies.
A separate interest QDRO offers more flexibility than a shared option, but it may not be the ideal choice for every divorcing couple. It’s important to work with an attorney who has experience in property division procedures and qualified domestic relations orders, in particular, to ensure the order is written to meet the needs of the client.