If you and your spouse have decided to go your separate ways after a marriage of many years, you will likely have significant assets to divide.
Your retirement accounts will be among the most valuable assets and various rules apply to the task of dividing such accounts fairly.
Transfer methods
Certain types of retirement accounts, such as a 401(k), require a Qualified Domestic Relations Order or QDRO to ensure the proper distribution of funds. The QDRO is a legal document that confirms the right of a spouse, former spouse or dependent to receive a certain portion of the money in that account. Other retirement funds require a Transfer Incident, which, like the QDRO, is a tax-free movement of money from the fund to the recipient.
Distribution options
You can rely on legal guidance to help you make the most of your particular retirement account distribution options. For example, you can request a direct transfer in order to roll retirement distributions into your own plan, cash out your allotted portion of the balance or put off taking a distribution until your spouse as holder of the account retires.
Tax consequences
Remember that different tax consequences apply to different kinds of retirement accounts. For example, you make contributions to a 401(k) or an IRA pre-tax but you contribute to a Roth IRA after you have paid the income tax. Because there are tax implications when you take money out of certain kinds of retirement accounts, do not hesitate to seek guidance before you decide how to proceed.