Critical Tips for Dividing your 401(k) in Divorce

 

Dividing up your finances in the process of a divorce is never easy but it can become much more complicated when you realize that you need a qualified domestic relations order. Dividing your 401(k) for a divorce settlement is less painful when you know all the right steps to ensure that everyone is satisfied and properly taken care of. Read on to learn the key steps you can take:

1. Make sure that your attorney draws up a QDRO. This tells the plan administrator how the funds should be divided. This document needs to be created properly and should be done under the guidance of a QDRO expert.
2. Make sure the details and the instructions of the QDRO are approved as well as finalized. They need to be accepted by the plan administrator a well as the judge in order to become active.
3. Make sure you discuss your 401(k) with the plan administrator when you decide to get a divorce. There may be specific requirements and regulations associated with your 401(k) that you will need to include in the QDRO document. Some plans may not allow disbursement immediately after the divorce is finalized, for example.
4. Ask for examples of model QDROs from the plan administrator. Since each retirement plan can be unique you want to know what to expect ahead of time so you should always request model copies.
5. Make sure to read the directions of your individual plan so that you know your options. These could include keeping your existing plan and using other marital assets to replace the value the portion, liquidating a portion of the fund for the divorce agreement or splitting the assets.
6. Make sure the QDRO is properly completed. All individuals must have signed the QDRO and it needs to be accepted by the plan administrator as well as the judge in the case in order to be active.
7. Consider money before the age of retirement. If there are some situations where an employer can withhold 20% for pre-paying the tax if funds are distributed from a 401(k) prior to retirement age.
8. Consider your options. Some of the options could include paying part of what is agreed on in cash and rolling over the remainder of the funds into a new plan.

All of these can be extremely important when you are putting together a QDRO and want to be aware of your options. Having a QDRO expert help you prepare these documents can be critical as well.  

Source : articlesbase.com