The division of marital property in a divorce includes dividing retirement accounts and pension benefits. When dividing these assets, a couple typically will use a Qualified Domestic Relations Order or QDRO.
For 401k accounts, a QDRO directs the retirement plan administrator to withdraw a specific amount of funds from the account and transfer them to the other spouse. By doing it this way, there are no fees for withdrawing prior to retirement age, and, if the recipient spouse rolls over the funds into their own retirement account, taxes on the amount withdrawn can be avoided.
Pension accounts are different in that, more often than not, the amount of benefits the ex-spouse will receive is unknown at the time of the couples divorce. Therefore, a QDRO typically spells out a percentage of the pension benefits the ex-spouse is entitled to when the pension holder retires and begins reconvening benefits. Often, this percentage is based on the number of years a couple is married, but there may be other factors that may be considered or ways of divvying up retirement funds to achieve an equitable division of retirement assets.
When you are considering divorce and have questions regarding the division of marital assets, such as a pension and 401K, contact the Libertyville Illinois family law offices of Ronald L Bell & Associates answers today at 847-495-6000.