Once spouses begin the process of divorce, they will be faced with the
arduous task of splitting assets and property, which can become quite
contentious. Among the assets to be divided are your retirement benefits,
including your 401(k) plan. If you have been married for a while and contributed
regularly to it, chances are you have amassed quite some savings and are
concerned about what might happen to it.
Here is what you need to know about splitting your 401(k) plan:
Splitting your 401(k) is a complicated process that generally involves
three steps. Your divorce decree must first order the division. Afterward,
your attorney will draft another legal document, which is known as a qualified
domestic relations order (QDRO). The QDRO tells the administrator of your
401(k) how to divide the plan in compliance with the Employee Retirement
Income Security Act (ERISA). Lastly, the QDRO must be approved and signed
by a family court judge and the plan’s administrator. Once this
is done, the QDRO will establish your spouse as an alternate payee.
If you are a recipient of an ex-spouse’s 401(k) plan, you have a
few options for collecting on it and will have to let the plan’s
administrator know which you are choosing. The retirement plan can be
rolled over into your own plan, or it can be left intact with your former
spouse’s and taken out when he or she retires. It is also possible
to take the money as a cash payment.
However, if you take your portion of the 401(k) plan as a one-time cash
payment, you are subject to a 10% penalty for early withdrawal if you
are under the age of 59 ½. Ultimately, your divorce decree is not
sufficient enough to actually split up your retirement benefits and if
either of you attempts to withdraw money without taking the proper steps,
you risk facing some severe and costly penalties. That is why it is crucial
to consult with an experienced divorce attorney as soon as possible.
Birmingham Divorce Attorney
At Gossman Law Firm, LLC, we understand the difficulties couples often
face as they proceed with the divorce process. Our Birmingham divorce
attorney will guide you through every step of your case and treat you
with the respect and compassion you deserve while providing the skilled
representation you need during this trying time. You should not have to
endure this alone and risk making mistakes that could potentially impact
your future for years to come.
Contact our office today at (205) 402-8808 to schedule a free consultation
with a knowledgeable member of our team.