How to Divide Retirement Money in a Divorce
A major element of a typical divorce case is dividing the assets of the partners. In many divorces, one of the most contentious and legally challenging elements of the case is distributing assets accumulated during the course of a marriage. Whether the laws of a particular state use a community property or equitable division standard, the assets obtained by the parties during a marriage are split between them. Included on the list of assets subject to division is retirement money that has accumulated during the marriage.
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Things You'll Need
- Retirement plan or account documents
- Property settlement agreement
- Qualified domestic-relations order
Instructions
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1
List each retirement plan in existence at the time the divorce case is filed.
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Determine the increase in value during the course of the marriage of each retirement plan. The increase in value represents the portion of any retirement plan that's subject to division--either through a settlement agreement or by order of the divorce court.
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Divide the grand total of the increase in value of all retirement plans. If you live in a community property state, the division will be done equally. If you live in an equitable division state, the standard that is applied by the court is what is fair in these circumstances. Therefore, you have more leeway in reaching a settlement and dividing the interest in the retirement account or accounts.
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Obtain a property-settlement agreement form and qualified domestic-relations order. Both of these forms are likely available through the clerk of the court's office.
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Draft a settlement agreement. Include within the settlement agreement the proportional division made of the total dollars gained in the retirement accounts during the course of the marriage.
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Prepare a qualified domestic-relations order. The qualified domestic-relations order is a legal document that takes into account the manner in which the retirement plans or accounts are divided. The qualified domestic-relations order provides a mechanism through which each party is paid a proportional amount from the retirement accounts at the time of retirement. Rather than face penalties and taxes by liquidating the retirement accounts at the present time, the qualified domestic-relations order allows you to avoid these negative consequences.
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Submit the draft of the qualified domestic-relations order to the judge for signature.
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Submit a certified (stamped as true and correct) copy of the domestic relations order to the administrator of any retirement plan subject to the order.
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Tips & Warnings
Don't simply set aside the entire interest in a solitary retirement plan to each party (even if the present-day value of the plans are similar). The reality is that each retirement plan may perform differently between the settlement of your divorce case and the date of your retirement.
Resolving the interests of the parties in retirement plans is a complex process. Indeed, divorce cases involve a variety of complicated matters. Therefore, consider hiring an attorney to represent you in your divorce case.
