When it comes time to separate, couples often have many questions on their minds. One of those concerns involves the division of retirement assets. If you have an IRA, 401(k), or pension, these retirement accounts may be subjected to division.
Here are some things to know about your divorce and dividing retirement assets in Ohio.
Retirement Assets and Your Divorce
In many couple’s financial portfolios, you often find a retirement account. These marital assets will need to be divided when the marriage ends. The state of Ohio uses the equitable distribution principle. With that, all marital property is divided fairly, not necessarily equally.
Retirement accounts qualify as marital property, especially if they were acquired during the marriage.
What Are Qualified Domestic Relations Orders (QDROs)?
Dividing retirement assets in Ohio usually involves the Qualified Domestic Relations Orders (QDRO). A QDRO specifies how a retirement plan or account will be divided between the divorcing spouses.
During this time, the division must comply with federal and state laws. Otherwise, it could trigger early withdrawal penalties or tax consequences.
Whether it’s a 401(k), IRA, pension, or other type of retirement asset, a QDRO is created for each account. The court must approve the document and the administrator of the plan.
How the Division Process Works
The first step is to assess the value of the retirement account. After that, the divorcing spouses and their attorneys negotiate the terms of the QDRO. Often, these accounts are divided through a percentage split, a specific dollar amount, or another fair method.
Once the parties agree to the terms, the QDRO goes to the court for approval. The court reviews the document to make sure it complies with state laws.
After the court approves the QDRO, it is sent to the retirement account administrator. This individual reviews the document to confirm compliance with the plan’s specific requirements.
Now, the division of the retirement assets can take place. During this time, separate accounts for each spouse or the direct transfer of funds may be created.
Finally, the retirement assets are distributed to each spouse as specified in the QDRO.
QDROs for Different Types of Retirement Assets
The use of QDROs can vary depending on the type of retirement asset. For 401(k)s, these employer-sponsored retirement accounts will have a specific percentage or amount to be awarded to the non-employee spouse.
IRAs are handled differently. The QDRO may transfer a specified sum or create a new IRA for the non-employee spouse. With that, they can manage the investments independently.
Pensions often require calculations to determine the portion awarded to the non-employee spouse. The QDRO will detail the method for calculating this amount, such as the coverture fraction method.
Learn About Dividing Retirement Assets in Ohio
Spouses going through a divorce involving retirement assets should seek legal counsel to help with this process. With that, both parties can work toward a fair and equitable distribution of these assets. In turn, that can help secure their financial well-being in the post-divorce phase. At Axelrod Law Office, we can help you understand your options for dividing retirement assets in Ohio. Please call our office at (440) 271-8126 or submit a contact form to schedule a free, confidential consultation.