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What happens to your retirement accounts during your divorce?

by | Jun 14, 2021 | Divorce, Property Division

If you are contemplating ending your marriage, you may already know you must divide the marital estate. Because California follows a community property approach, you and your soon-to-be ex-spouse are likely to end up with a roughly equal share of everything you own.

While dividing your home, cars, belongings and cash may be straightforward, your retirement accounts are likely to be a bit more challenging. Still, because your retirement funds are probably a large part of your marital estate, you want to be sure you receive what you deserve.

Marital versus separate property

Even though you and your husband or wife must divide marital assets, you can probably keep anything that is separate property. While your retirement funds may be separate from the marital estate, most courts consider pensions, employer plans and individual retirement accounts to be marital property.

This may be especially true if you do not have a premarital agreement or another legally binding contract that defines ownership of your retirement accounts.

Qualified domestic relations orders

When a judge divides your retirement accounts, he or she should issue a qualified domestic relations order. You must then deliver the order to the retirement plan administrator. The administrator uses the QDRO to pay funds to the appropriate spouse. Typically, you must obtain and submit separate QDROs for each retirement plan you have.

After you submit your QDRO, you may have some options for receiving payment. While some of your options may trigger penalties or tax consequences, pursuing QDROs for all your retirement accounts ensures you leave nothing behind.