On behalf of Stange Law Firm, PC posted in High Asset Divorce on Thursday, March 15, 2018.
Ending a marriage is never easy. When two people have built a life together, it can take a bit of strategy to untangle the threads. One facet of divorce is property division, where the two parties divide the marital assets between them. Retirement accounts and investment accounts typically represent the divorcing couple’s largest collection of funds. In Missouri, each type of account has its own rules for separation, and by following the rules, an individual can avoid common mistakes that could potentially reduce his or her portion of the sum.
In order to split a 401(k), an order called the Qualified Domestic Relations Order must be filed. Each account should have its own order. This will typically be filed along with the divorce settlement. The QDRO allows the transfer of the funds from one account to another. The document is usually drafted by a professional — often a lawyer, and will need to be written so that it matches the intent of the divorce order.
Other accounts, like IRAs, do not require the QDRO. When the divorce is finalized, an individual can submit a copy of the divorce agreement and file paperwork with the account custodian to complete the transfer. Funds that are immediately rolled over into a rollover IRA are not subject to a tax, but if the money is withdrawn, the person must pay income taxes on the funds.
By utilizing strategy when dividing marital assets, a person in Missouri can ensure that he or she will be able to split the funds without unnecessary tax penalties or violations of procedure. The divorce process can be tiring and emotionally draining. For outside help, many choose to rely on the services of an experienced family law attorney.
Source: CNBC, “How to avoid mistakes dividing up 401(k) assets in divorce“, Sarah O’Brien, March 7, 2018