Understanding what assets you are entitled to when you and your spouse get a divorce is critical to receiving a fair outcome. However, as you’ll discover during your divorce, the division of assets is not as simple as combining all assets and splitting them in half. For example, you’ll need to submit a document known as a Qualified Domestic Relations Order (QDRO) to divide a retirement account. The following blog explores what you should know about this document, including how it works and the importance of working with Morris County property division lawyers to help you navigate these difficult matters.
What Is a QDRO?
A Qualified Domestic Relations Order, QDRO, is a document used when a couple divorces to help divide and distribute a retirement account or pension so the spouse who does not own the asset can receive the funds they deserve.
When you or your spouse files for divorce in New York, it’s important to understand how assets are divided. Generally, any asset obtained over the course of your marriage, regardless of who technically owns the property, will be considered a marital asset and thus subject to division. New York adheres to the equitable distribution statute, meaning all assets will be divided based on fairness rather than equally. In some instances, the fair split of assets is equal, but 50/50 is not automatic.
As such, if your spouse has a retirement account, they contributed to during the course of your marriage, you are likely entitled to a portion of these funds, as this will be deemed a marital asset. However, any withdrawal from the account prior to the account owner being 59 and a half will result in a hefty 10% tax on the funds. As such, you can utilize a QDRO to make a withdrawal, penalty-free.
You should note, however, that a QDRO is only able to evade the early withdrawal penalty if the funds are deposited into a retirement account. For example, you can take the funds withdrawn from your spouse’s 401(k) and deposit them into your own IRA. However, if you deposit the funds into a savings account, you’ll incur the tax.
How Do I Create One?
In order to create a QDRO, you’ll need some important information to ensure the document is legally binding. This includes the following information:
- The full legal names of both the participant (spouse who owns the account) and the alternate payee (non-paying spouse)
- The legal mailing addresses of both parties
- The exact amount that will be transferred to the alternate payee, in dollars or percentage
- How and when the payments will be sent
As you can see, dividing a retirement account has a considerable number of elements you must take into account, which is why working with an experienced attorney is critical. At Leslie Law Firm, LLC, our team will examine your circumstances to help you create a QDRO and fight for the best outcome. Connect with us today to learn more.
