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How retirement assets are treated in divorce

| May 16, 2019 | Divorce

Many couples in Missouri are aware of how important retirement savings are, and do their best to plan and save accordingly. For some couples, retirement savings can account for a significant portion of their property. This can make figuring out how to divide retirement assets during a divorce extremely difficult.

Not all retirement assets are treated the same during a divorce. Individuals will need a Qualified Domestic Relations Order to handle a defined contribution plan — such as a 401(k) — without taking penalties or encountering certain tax implications. A QDRO is a court order for a retirement plan, which allows for payments for marital property rights, child support and more. Some divorcees choose to have their portion of a defined contribution plan roll over into a separate retirement account, but this is not a requirement.

Pensions can be somewhat more complicated to tackle. These retirement assets do not have a current cash value, and additional benefits may be accrued over the years. A QDRO is also necessary for tackling a pension. The QDRO will address whether an ex-spouse will receive a lump sum payment in lieu of the retirement benefits, the couple will divide benefits as they are paid or if the court will order distributions later in the future.

In most cases, anything saved for retirement after a couple says “I do” is considered marital property. This includes things like 401(k)s, pensions, IRAs and more. While dividing these assets is a necessary process during divorce, Missouri couples should avoid taking actions that might lead to penalties or avoidable taxes. Since this is a complicated matter, an experienced attorney can generally provide more detailed guidance.

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