When a couple divorces and has to divide retirement assets, a Qualified Domestic Relations Order may be necessary. A QDRO outlines how much money will need to be provided from one spouse’s retirement account to the ex, and it can also determine what those assets will go toward. For instance, assets from the account could be considered payments for alimony.
In general, people are owed half of the increased value in a retirement account during the course of a marriage. If a retirement account started with $1,000 in it when a couple was married and is worth $20,000 when they divorce, an ex-spouse would be entitled to $9,500 from the account.
However, during asset division, one person may allow their spouse to keep 100 percent of the value of a retirement account in exchange for 100 percent of the value of another item. Someone may decide to keep a car or the contents of a couple’s bank account instead of taking funds from the retirement account. It’s important to have a financial analyst help with this decision to ensure that people are getting the assets that are most beneficial to them in the long and short term.
California is a community property state, so property division is based on dividing up a couple’s assets in half. This also applies to debts that have been incurred over the course of a marriage. Any increase in assets or debts during a couple’s marriage may be split up evenly when the marriage ends. Therefore, it’s essential to understand what constitutes marital property and what does not. A lawyer could explain how this is determined.