A couple that has spent their life together in New York has probably accumulated assets throughout their marriage. Retirement accounts are often the most valuable assets they own. Therefore, figuring out how to divide these accounts can become a contentious issue during divorce proceedings, whether they are considered high asset or not. Since there may be applicable tax implications and their division is generally a complicated issue, the handling of retirement accounts during marriage dissolution is often improperly dealt with, which is why couples going through a divorce should understand the repercussions of their financial decisions.
If one party has an employer-sponsored retirement plan such as a 401(k) or a pension plan, then the other party is legally entitled to part of the balance as long as their isn’t any prenuptial or postnuptial agreement stating otherwise. But what happens if only one spouse is working? In those circumstances, how can the other spouse protect their share of a retirement account? Through a Qualified Domestic Relations Order.
The court issues a QDRO, either through an order, judgment, or decree that is related to child support alimony or property rights. It can also cover a spouse’s pension plan, as it instructs the necessary parties as to how to pay the nonearning spouse their share of the benefits. A QDRO differs from a marital agreement in that it guarantees that the funds in the retirement account or pension plan will be separated and withdrawn without incurring a penalty and will be deposited into the nonemployee spouse’s retirement account or whatever provision has been made. It’s important to keep in mind that just because a divorce decree covers a retirement account, it doesn’t guarantee that the party will have a right to it.
In order for the division of a retirement account to be valid, there are certain procedural and legal requirements that must be met. In order to protect one’s right to their soon-to-be ex-spouse’s retirement accounts, it might be helpful to consult an experienced attorney for guidance on how to proceed with property division in a high asset divorce.