As part of your divorce, you will need to determine what you and your spouse’s respective interests are in each other’s retirement benefits. Retirement benefits are governed by both state and federal laws, and it is important that you understand the differences between how different types of retirement savings plans are valued and how they will be divided upon a divorce. Your attorney will help you identify what retirement assets are divisible, how to identify what portion of those assets you may be entitled to, and how best to structure any division so that it will result in the least tax consequences, the least amount of transfers, and ensure the division is done in a way that the plan will allow.
There are several ways that you can value pension benefits, and it is important that you and your attorney discuss the differences. Sometimes your attorney may advise you to obtain the assistance of a financial expert to help you determine the best way to value these assets as different methods may impact your future financial plan.
Once retirement assets are divided, you will sometimes need to have your attorney draft a “Qualified Domestic Relations Order,” or “QDRO” for short, in order to direct the administrator of the account to divide the asset in accordance with your divorce agreement or order.
Sometimes, a divorcing couple will agree to divide retirement assets differently than a court might order to better address their individual circumstances. Even when an agreement can be reached between the parties, it is necessary to ensure that the pension administrator has the Order and legal notice it requires to distribute assets accordingly. In any divorce, obtaining the advice of an attorney well versed in retirement asset division is in your best interest.