Retirement funds can be major divorce issue

When couples in Pennsylvania move toward divorce, the financial issues surrounding the end of a marriage can be more challenging and difficult than the emotional and practical concerns. In many cases, retirement funds are the most significant and largest asset of a couple handled as part of a divorce settlement. As these savings are often the largest single asset at stake, dealing with them requires a high degree of precision and attention.

Different types of retirement accounts are handled differently in a divorce, and if the property division is not completed correctly, both divorcing spouses could find their savings reduced by significant taxes and penalties. In addition, an unequal or inequitable distribution could also result; this is a major concern for divorcing couples, as 62 percent of divorce lawyers noted that retirement funds are a contentious issue in a 2016 survey.

When a retirement plan to be divided is based in the workplace of one spouse, the court must issue a qualified domestic relations order (QDRO) to carry out the distribution. This is required both for traditional pension plans and 401(k)s. While the QDRO is based on the divorce agreement, it is not automatically issued along with the divorce decree. When more than one account is being handled, a separate QDRO is required for each. Because retirement funds are frequently invested in somewhat volatile instruments like mutual funds and stocks, their value can vary. QDROs should divide the account by percentage and not by a dollar figure.

The family law attorney that represented a spouse in the divorce may be able to draft the text of the QDRO for approval by the court. a divorce lawyer might be able to provide strong advice and representation to clients going through a divorce in working with plan administrators to effectuate the property division and dealing responsibly with the financial side of the end of a marriage.


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