When you are going through a divorce, it’s important to understand that this is more than just an emotional time. Instead, you’ll find that there are many complex legal and financial matters you must take into consideration. For example, do you know what will happen to a retirement plan owned by you or your spouse? If not, you’ll want to keep reading to learn how this asset is divided and what you should know about qualified domestic relations orders. Additionally, you’ll discover why connecting with a Los Angeles division of assets attorney is critical to help you through this process.
What Are Qualified Domestic Relations Orders?
Qualified Domestic Relations Orders (QDROs) are documents issued by the court as part of a divorce agreement. Essentially, these declare that someone, typically a former spouse, is retired to a portion of the retirement account owner’s funds. As such, this allows the other party to receive a share of the funds they are legally entitled to.
It’s important to understand that only retirement plans covered under the Employee Retirement Income Security Act (ERISA) are eligible to be divided with a QDRO. This includes 401(k)s but does not include IRAs.
How Do They Work?
A QDRO works by helping give the spouse who does not own the retirement account a portion of the benefits as if they were a participant in the plan. This allows the spouse to withdraw the funds from the owner’s account without incurring the 10% tax penalty on the withdrawn funds.
If there is no QDRO and the owner gives their spouse a portion of the retirement, they must pay high taxes on the assets withdrawn from the account. However, using a QDRO allows the transfer from the owner’s account to a retirement account of the spouse to be tax-free.
For example, if Mary has an employee-sponsored 401(k) account established before the marriage with $10,000 in it, and accumulated another $20,000 in savings after she was married to Mike. The QDRO will split the funds obtained over the course of the marriage, meaning Mary will keep the initial $10,000 in the account, but must split the $20,000 evenly with Mike.
What Should I Do if I Need a QDRO?
If you are going through a divorce, it’s imperative to have an attorney help you with any QDRO issues you may face. Unfortunately, this process can be incredibly complex, and failing to navigate it correctly can result in unfavorable outcomes, such as missing out on funds you are entitled to.
When you need help recovering the assets you are entitled to during a divorce, the team at the Zitser Family Law Group is ready to assist you. We know that divorce can be a complex emotional time, which is why we will handle the legal complexities of this matter. Contact us today to learn how our competent and compassionate firm can represent you during these matters.
