When a couple in West Virginia comes to the difficult decision to seek a legal end to their marriage, they are often left facing several other major decisions. Decisions regarding child and spousal support and what will happen with the family home are obvious. However, a study conducted by the American Academy of Matrimonial Lawyers in 2016 found that issues regarding the division of retirement accounts and pensions were among one of the top three most contentious issues. Many people are unsure of their options when diving such an asset in a divorce.
If one member of the couple has a 401(k) that needs to be split, there are several important issues that could prevent unnecessary expense and complication in the future. For example, a workplace retirement plan requires a qualified domestic relations order in order for it to be split. A qualified attorney can help create a QDRO.
While a QDRO is based on a divorce agreement, it is a separate document. It is necessary for the professional who prepares the document to contact the plan’s administrator to determine what the steps are for a smooth transition, and there must be a separate QDRO for each relevant account. A divorce is one of the few times that funds can be withdrawn from such accounts without penalty. A person receiving funds can decide whether to roll the funds into an IRA without penalty or whether to receive the funds directly, which would result in a 10 percent withdrawal fee.
The many different decisions revolving around a West Virginia divorce can quickly become overwhelming in a time already emotionally heightened. Having an attorney with experience with a variety of different family law matters can not only reduce the stress of the situation but can also reduce the possibility of mistakes that may be costly, if not impossible, to correct after an agreement is signed. Fortunately, for most who make the decision, the choice to do so is often the first step to a happier life.
Source: cnbc.com, “How to avoid mistakes dividing up 401(k) assets in divorce“, Sarah O’Brien, March 7, 2018