Dealing with retirement accounts during a divorce

Divorce is often difficult, and it can be especially difficult for couples who are older and thus have larger retirement accounts to worry about. States such as Kentucky have what is called marital property within their laws. That means anything that was introduced or gained during the marriage is the property of both people. How does that work with retirement accounts? Read on to learn further about this important issue that older couples have to deal with during a divorce.

Why you need a QDRO

A QDRO, or qualified domestic relations order, is a court order that is not directly tied to your divorce case. As stated above, everything that is considered marital property will be divided, including retirement accounts such as a 401(k) or company pension. A QDRO allows couples to separate and transfer these funds during a divorce without worrying about the early access penalty that the government imposes.

How to protect your accounts

In many cases, the person who has retirement accounts may not want to give half to their former spouse. Although there is no way to get that waived, you can find other ways to keep your accounts while providing your former spouse the same value. For example, if you own multiple properties, you may choose to give them the equivalent of half of the retirement accounts’ value but through property division. Other manners in which the issue can be resolved is through the following:

  • Liquidation of the accounts
  • Rolling a 401(k) into an IRA
  • Simply dividing the accounts through a QDRO

Divorce and the splitting of retirement accounts is never an easy thing to go through. It is highly recommended to have an attorney present through every part of the process. This may help you avoid common legal mistakes as well as help you understand your rights and powers.