Couples in California who get a divorce should take extra precautions when dividing their retirement assets. The different types of retirement accounts are governed by specific rules that dictate exactly how they should be divided. If the correct procedure is not adhered to, divorcees may find themselves saddled with expensive penalties and tax bills. They may also end up giving their ex-spouse a larger percentage of their retirement funds than they intended.
A qualified domestic relations order is needed to divide workplace retirement plans like traditional pension plans and 401(k) plans. The legal order is the only way individuals who are entitled to a portion of their ex-spouse’s workplace retirement plan will be able to legally obtain their share.
Even though it is based on the terms that are stipulated in the divorce decree, the QDRO is a separate legal document. it should be carefully reviewed by an attorney to ensure that it is in line with the contents of the divorce decree.
The QDRO should specify how the funds from the retirement plan will be handled, such as whether the funds allotted to the other spouse are to be distributed directly to the spouse or if they should be placed in a rollover IRA. After the QDRO has been reviewed and filed with the court, the administrator of the 401(k) plan has to provide approval before any funds can be moved.
An attorney who practices family law may work to ensure that the rights of clients involved in a high-asset divorce are properly protected. The attorney might engage in litigation to obtain favorable divorce settlement terms regarding a range of divorce legal issues, including property division. It may also be the attorney’s responsibility to ensure that the proper procedure is followed when having assets like retirement plans, real estate, business assets and offshore accounts divided.