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Law Offices of Hannah E. Sims, LL.M.
Oakland Certified Family Law Specialist

Accuracy important when dividing retirement funds

Retirement funds can often be the largest single asset at stake in a divorce for couples in California who have decided to end their marriages. Because these accounts are so critical to the financial future and security of both parties, dealing with them can be one of the most contentious issues in divorce negotiations. Indeed, in a 2016 survey, 62 percent of divorce lawyers identified retirement accounts as one of the most difficult issues for their clients to address.

Each type of retirement account must be handled appropriately for the legal and financial rules that govern it, even when it is being distributed as part of a property division settlement in a divorce. If the distribution is not dealt with properly, each spouse could face significant financial losses in terms of taxes, fees and penalties, and the outcome of the distribution could also reflect an inequitable or unequal outcome.

In order to carry out the division of a retirement plan that's based in one of the spouses' workplaces, a qualified domestic relations order (QDRO) must be obtained from the court. While the text of the QDRO is based on the agreement in the divorce, it is not issued automatically alongside the divorce decree. If multiple accounts are being divided, an individual QDRO is necessary for each one. In addition, the type of distribution, for example, to a rollover account or cash, should also be specified in order to ensure that taxation is handled correctly.

The family law attorney that handled the divorce for a spouse can also draft the necessary QDROs and have them approved by the court in addition to working directly with the plan administrator to ensure the property division is handled accurately. A lawyer can deal with the practical and financial aspects of the end of a marriage in addition to providing strong representation during the settlement period.

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