Couples who marry generally expect to spend the rest of their lives together. They may symbolize this by combining their finances, purchasing real estate and investing for their future together. When dissolving a marriage, asset division can be emotionally and logistically challenging. One of the most carefully regulated assets to split is a retirement fund protected by the Employee Retirement Income Security Act and the Internal Revenue Code.
During property division in a divorce, retirement funds often get split according to New Jersey’s equitable division guidelines. However, if one spouse obtains all or a portion of the other spouse’s retirement fund, this is not an asset the plan participant can just hand over to his or her ex. Instead, the court must enter a qualified domestic relations order, which allows the participant to assign to the ex a portion of the assets in the plan.
It is important for a spouse facing divorce to seek a QDRO in order to obtain the funds in the retirement plan without facing substantial tax or early withdrawal penalties. The QDRO must include specific information, such as the amount and number of payouts, and it can only apply to a family member, such as a child or dependent, spouse, or ex-spouse. Then the ex with a QDRO receives benefits from the plan in the same way a plan participant would.
Drafting a QDRO can be complicated, and making mistakes can lead to financial penalties or setbacks. This is why many divorcing spouses in New Jersey seek legal advice from a skilled attorney. An attorney with experience in high-asset divorce can assist an individual in maximizing his or her financial outcome during property division, including obtaining a fair share of investments and retirement funds.