Divorcing couples in New Hampshire often have to deal with financial challenges when their marriage is coming to an end. One of those challenges involves splitting the funds in retirement savings accounts. You’ll need to follow specific rules regarding these accounts, which can vary according to the individual plan.
You’ll need a Qualified Domestic Relations Order
Although the title sounds ominous, a Qualified Domestic Relations Order (QDRO) is essentially a legal document that allows you to divide the retirement funds. A QDRO can also involve child support, alimony, and property rights in addition to instructing your spouse’s pension plan on how to pay your share of benefits in your divorce settlement. The QDRO is necessary to protect your assets.
QDROs only apply to retirement plans that are IRS tax-qualified and covered by the Employee Retirement Income Security Act. Your domestic relations order will only become effective when the retirement plan administrator and the courts approve the document. Drafting these orders can be tricky, especially if large amounts of money are involved. 401(k) plans with defined contributions are more straightforward to calculate than pension benefit plans. In some cases, you may need to work with an actuary to determine your share of the plan’s assets.
Will I need a QDRO to divide all assets?
Equitable property division is often one of the most contentious areas of divorce. If you and your spouse have separate IRAs that are not a part of a pension plan and other retirement options, those assets may not need a QDRO.
While you may be entitled to half of your spouse’s retirement plan benefits, you may have to work out creative ways to get your share. Educate yourself on this matter early in the divorce negotiation by working with a financial planner so you won’t face any unpleasant surprises.