How to Divide Retirement Plans

How to Divide Retirement Plans

Retirement plans are often the largest marital asset for a married couple. Retirement plans are subject to division under Massachusetts law. This means when spouses divorce, one spouse may be entitled to a share of the other spouse’s retirement plan. Special measures must be taken to divide retirement plans, because retirement savings are usually tax-deferred, making them a government interest. Accordingly, the management and division of most plans are overseen by governmental regulations. You can divide your retirement assets without incurring taxes or penalties, however, if you follow the right steps.

The plan administrator must approve of any division of plan assets. Courts and plan administrators use QDROs or Qualified Domestic Relations Orders to divide the assets in ERISA-qualified plans such as 401(k)s. QDROs are complicated documents and must be prepared carefully. QDROs outline the specifics of the plan and how the assets will be transferred to the alternate payee. Any withdrawal of plan assets may be taxable and can incur penalties without getting a QDRO approved by the plan administrator and filed with the court. Assets rolled over into the alternate payee’s plan with a QDRO are tax-deferred. Not all plans can be divided with a QDRO. Some plans such as traditional IRAs may require a slightly different process but will typically still require a court order. Consult with your plan administrator if you have questions about the specific requirements of your plan to make sure you follow the right procedure.

Be careful when you divide retirement plans during your divorce. Any mistakes made could cost you to incur taxes and penalties on the division. As long as you do your research and fill out your QDRO properly, dividing your plan is not an insurmountable task. It is never a good idea to try to handle the division of your retirement assets on your own, though. Be sure to consult with an experienced Massachusetts divorce mediator to make sure you are aware of all your options for dividing your plans and other assets. Negotiating an agreement with your spouse on how your assets will be divided before you begin your QDRO can help ensure your divorce is efficient and economical.

Do you have questions about dividing your retirement plan in your divorce? Mediation Advantage Services is here to help. Polly A. Tatum is highly experienced in Massachusetts family law and can help you and your spouse amicably divide your assets in mediation. Based in historic Worcester with a satellite office in Northboro, MA, our firm serves all cities and towns throughout Massachusetts and Worcester County including, Auburn, Paxton, Leicester, Sutton, Grafton, Shrewsbury, Westboro, Northboro, Southboro, Holden, Sterling, Princeton, Worcester, Charlton, Millbury, Dudley, Spencer, Brookfield, Sudbury, Natick, Framingham, Hopkinton, Milford, Blackstone, Leominster, Fitchburg, Acton, Jefferson, Barre, Oakham, Cambridge, Newton, Marlboro, Lancaster, Bolton, and Hudson. Call our office at (508) 645-6374, fill out our online form, or email us at info@mediationadvantage.com today to schedule your Complimentary Mediation Success Planning Session. You can also sign up for our eNewsletter or download our free e-book for more information regarding divorce in Massachusetts.

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