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Dividing retirement assets during a divorce

A divorce can be one of the most stressful times in your life, especially if you’ve been with your spouse for many years. There are many considerations for people in Colorado, including property, assets, and investment and retirement accounts. Often the most importance is placed on property division or other tangible assets. As a result, retirement and pensions can sometimes be pushed to the back of the negotiations.

This can be a big mistake, as some retirement accounts can be worth more than real property. There are some things that you can do to ensure that you get your fair share of these accounts.

A Qualified Domestic Relations Order (QDRO) is a legal order that changes or splits up the ownership of pension and retirement funds. This is how a divorced spouse will get his or her share of pension or retirement accounts. A QDRO is only applicable to pension or employment benefits that are subject to the Employee Retirement Income Security Act (ERISA), which is the law that governs pensions in the private sector. However, there are similar types of orders available for military or federal civil service retirement plans.

One of the main reasons a QDRO is so important is because of possible tax implications. If you transfer money into your ex-spouse’s account from your retirement account incorrectly, there could be a huge tax bill on the money you paid your spouse.

This can be a complicated document, so it’s best to consult with financial advisors and an experienced family law attorney so that you know the implications of the QDRO. For example, if you only have an IRA to split up, there may be no need for a QDRO. You can simply lay out how the IRA will be divided. Even so, there still could be a significant tax bill or penalties for withdrawing your money early.

Divorce can be even more complex when dealing with retirement accounts, especially when you consider the tax implications. If a QDRO isn’t completed correctly, the spouse with the retirement could end up paying taxes on money that is no longer his or hers, while the spouse receiving the money could end up with very little in a 50/50 split if the value drops because of a stock market plunge. Seeking advice from experienced professionals can help, no matter which side of the QDRO you might be on.

Source:, “How to divide your retirement assets in a divorce” No author given, Oct. 31, 2013


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