In addition to being an emotion-draining process, divorcing as one approaches retirement age presents a variety of financial challenges such as determining the appropriate level of spousal support and dividing property. One of the trickier marital assets for Georgia couples to split during a divorce is likely to be a couple's retirement savings.
This is especially true for the over-50 crowd, which has seen its cumulative divorce rate jump in recent years. Couples over 50 now account for one out of four divorces in America. These couples are likely also eyeing retirement, making the issue of retirement asset division especially significant. At the same time, the economy has taken a bite out of many retirement plans.
Divorcing couples where one or both spouses have a retirement account through work, such as a 401(k), 403(b) or a 457 plan, will need to get a Qualified Domestic Relations Order before they can split any such accounts.
A QDRO protects both spouses. It benefits the former spouse of the account holder by establishing his or her right to part of the benefits. After all, part or all of a retirement asset was accumulated during the marriage and is therefore considered marital property.
For the account holder, on the other hand, a QDRO saves him or her from having to pay early withdrawal penalties and taxes that would otherwise result from transferring assets to a former spouse.
For couples with multiple employment-based retirement accounts, a separate QDRO should be prepared for each account - preferably by an experienced attorney. Each QDRO must then be approved by a court and provided to the administrator of the former spouse's various employer-sponsored retirement accounts. Individual retirement accounts, also known as IRAs, do not need a QDRO.
In preparing a QDRO, couples may split up the account as they see fit. However, if they cannot agree on the specific allocation, they should be prepared for the court to step in to apportion to the account in accordance with Georgia law.
Source: The Wall Street Journal, "How to split a 401(k) in a divorce," Anne Tergesen, June 2, 2012