Splitting Up Retirement Accounts In High Net-Worth Divorce

What’s one of the highest value assets most high net-worth couples must divide in a contested divorce? House? Vacation home? Business ownership?

If you answered retirement accounts, you are correct. While not always THE largest asset among the group listed above, it is certainly always near the top of the list that must be divvied up by divorcing couples. If the process for the division of those assets is not done correctly, there can be a devastating price to pay in taxes, penalties or an unwarranted amount of money going to a soon-to-be ex-spouse.

Are you are entitled to a portion of your spouse’s retirement account? Maybe yes, maybe no – there are a blizzard of laws and regulations that vary from state-to-state on this subject. But if you are entitled to a share, the only way to legally access many types of retirement accounts is through what’s called a qualified domestic relations order, or QDRO.

A QDRO is separate from a divorce agreement, although it is based on the information in that decree. Because these court orders are a specialized legal area, make sure the attorney who drafts it has the right expertise.

Ideally, the attorney that draws up your QDRO will be your divorce lawyer too, so he or she will be fully knowledgeable about other aspects of your divorce. This person should contact your plan’s administrator to ensure the required steps are taken for an orderly transfer of your share of 401(k) funds or pension plan benefits (whether immediate or future) to your soon-to-be ex.

If more than one retirement account is getting split up, a separate court order is required for each one.

Much more could be written about this subject. The most important takeaway is to consult an experienced divorce attorney.

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