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What Happens To Your Retirement Accounts During Divorce

Many people build up their retirement accounts throughout their entire lives. It can make up a significant portion of your financial assets. So, you may be concerned about what will happen to your retirement accounts during your divorce. Is your spouse entitled to an equal portion of your 401k and/or IRA account?

How Are Retirement Accounts Handled And Divided?

In short, most states consider retirement plans like 401ks and IRAs like marital property. That means that the portion of your accounts earned or contributed to during your marriage is usually divided between each spouse.

However, the portion earned or contributed to prior to your marriage is separate property and usually is given to, in full, whoever contributed it.

Certain retirement accounts also should require a Qualified Domestic Relations Order in order to be carried out.

What Is A Qualified Domestic Relations Order?

A QDRO is a decree or order for a retirement plans that are covered by ERISA (Employee Retirement Income Security Act) and its defied plans, such as a 401k or a pension plan. It outlines what portion of the plan or account goes to the spouse of former spouse. It is designed ensure each party receives their fair share of these accounts.

A QDRO is also required in order to receive these benefits, despite whatever the divorce settlement may say. IRAs and other uncovered accounts do not factor into a QDRO and should be outlined in the divorce settlement, however.

These assets can be particularly confusing and complex to navigate. There are tax benefits, exemptions and various additional factors to consider as well. Consult your divorce attorney to get a better idea of your situation.

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