Retirement Funds Can Be Contentious Divorce Matter

When North Carolina couples end their marriage, dividing up the assets and dealing with financial matters can be the most contentious and difficult parts of the divorce. This can be especially true for retirement funds, which often are the largest single financial item at stake for both partners. Given how important a 401(k), pension plan or IRA can be to the financial future of both parties, handling them during negotiations and the divorce settlement can be a delicate matter.

Each type of account can be handled somewhat differently in a divorce, even if the principles governing property division remain the same. If the orders to carry out the division of the funds are not executed properly, each divorcing spouse could find their investment in retirement diminished due to fees, penalties and taxes. In addition, if the fund division is carried out inaccurately, there could be an inequitable distribution of funds from the account.

A qualified domestic relations order or QDRO is required to carry out a division of a retirement plan that is based in the workplace of one of the spouses. The QDRO is based on the divorce agreement but is not issued automatically with the divorce decree. If multiple funds are being divided, a separate QDRO is required for each one. It is important that the QDRO reflect a percentage distribution because the actual value of the fund can fluctuate daily due to investment changes.

The family law attorney who represented a spouse in the divorce may also be able to draft the text of the QDRO and have it approved by the court, as well as working with the plan administrator to ensure that the property division is carried out appropriately. A divorce lawyer may also help spouses handle the practical side of divorce finances as well as the contentious issues in negotiations.

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