During a divorce, issues of GA property division, GA child custody, and GA spousal support can easily overshadow the importance of the division of retirement benefits. Obtaining a Qualified Domestic Relations Order may be one of the most important documents in a Georgia divorce if a spouse can be awarded with part of their soon to be ex-spouse’s retirement plan.
A Qualified Domestic Relations Order (QDRO) creates or recognizes the existence of an alternate payee’s right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a pension plan. Simply put, a QDRO establishes legal rights to receive a designated percent of an ex-spouse’s IRA, pension plan, 401(k), or profit-sharing plans proceeding a GA divorce.
When an ex-spouse receives the entitled money from a retirement plan he/she will be responsible for paying the related income taxes if received in the form of an annuity, pension, or withdrawal and will become a co-beneficiary of the existing pension account. The entitled ex-spouse can also withdraw his/her share and roll money into his/her own IRA. A rollover will allow for the postponing of taxes until funds are withdrawn from the IRA.
If funds from a qualified retirement account in Georgia are distributed to an ex-spouse without a QDRO the person with the account, not the ex-spouse receiving the funds, will be responsible for paying the income tax and may even be charged with a 10% premature withdrawal penalty. Without a QDRO your ex-spouse can receive funds from your retirement plan through a tax-free windfall at your expense.
If you are facing a divorce and the division of retirement assets, QDRO’s can be extremely complicated. We highly recommend speaking with one of our Georgia Divorce attorneys. Contact us for a consultation. We look forward to hearing from you!
Tags: 401(k) division GA divorce, GA divorce retirement benefits lawyer, Georgia divorce QDRO, IRA division GA divorce lawyer, QDRO Retirement Divorce GA Attorney, Qualified Domestic Relations Orders
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The good thing is a QDRO covers more than one plan.A QDRO can assign rights to retirement benefits under more than one retirement plan of the same or different employers as long as each plan and the assignment of benefit rights under each plan are clearly specified.
You should consult a tax professional with divorce case experience to make sure all the required bells and whistles get included. Obviously, this must happen before the divorce papers are finalized. Do not assume your divorce attorney knows how to take care of this QDRO stuff.
More than twice as many men as women have retirement benefits, and the benefits for men are generally much larger than those for women. Because of this, women very often are in a position to trade off their share of spousal retirements for other assets. So it is good to QDRO.
Great post,this was quite interesting. Right now I am working towards retirement plans, I might as well take the right step.
I have always viewed QDRO from a thousand miles and never understood the concept. Thanks for this great post.
This method for division of retirement benefits is most helpful when one party to a divorce has little to no retirement benefits in his or her own name.Some retirement benefits can not be divided by a QDRO.
Great post,this was quite interesting…