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.