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Litigation Blog.
The seasoned lawyers and litigators at The Rubinstein Law Firm are here to share their insights with you.

How to divide a retirement plan in a divorce

Many Michigan residents participate in retirement plans offered by their employers. During a marriage, couples may keep a close eye on these accounts and decide how to use the funds in the future.

However, if a couple divorces, the money in retirement accounts might have to be divided. In this blog post, we will look at how to do that.

How to avoid penalties

For people who have not reached retirement age, the prospect of losing a portion of their retirement accounts is not the only concern. Early withdrawal typically comes with a stiff tax penalty, along with the usual taxes. To avoid these consequences, the parties need a qualified domestic relations order.

A QDRO is an order entered by the court that allows the parties to make a distribution in connection with a divorce settlement or decree, without the usual tax penalties. The person receiving the distribution is responsible for taxes associated with future withdrawals.

How to get a QDRO

Obtaining such a QDRO may sound easy, but it requires research and preparation. Anyone transferring retirement funds in connection with a divorce should make sure the QDRO complies with Michigan law and the plan administration requirements.

Any error could invalidate the QDRO. Working with an experienced divorce attorney would be prudent. It also would be wise to consult with the plan administrator to see what the plan requires.