Divorce and the Retirement Assets

I recently read an article on SmartMoney.com, which is put out by Fidelity.com that discussed "Divorce over 50: 3 Mistakes to Avoid" by Catey Hill.

The first "mistake" referred to was to ignore the tax consequences of retirement funds. Our office happens to be very knowledgeable regarding retirement accounts because we study the plans for our own clients, and we are also often hired by other attorneys to assist their clients in drafting the documents required to divide the retirement assets.

In order for an employer to give a portion of an employee's pension or retirement account (ex. 401(k), savings plans, etc.) to someone other than the employee, a document that is separate from the divorce decree or settlement agreement must be drafted, submitted to the court, and then sent to the employer. We are often hired to draft such orders, also known as Qualified Domestic Relations Orders, or QDROs. These orders have to address all the provisions of the plan, including but not limited to: the amount awarded, what happens if the employee dies prior to or after they retire, and when the former spouse can begin to collect his or her portion of the pension. You do not always need to wait until he or she retires before you can get your share!

You may think it would be common sense for an attorney to understand the plan and to know what the value of that plan is before they attempt to negotiate a settlement, but this is not always true. We are available to consult with attorneys if they have questions, and advise one party or the other how the terms of the Order could be written to achieve the most favorable result.

If you are getting divorced, and your attorney does not seem to have a handle on how the retirement plan works or what the value of that plan is in today's dollars and in the future, I suggest you call our office before you sign a settlement agreement.

Additionally, if you have been divorced and were awarded a piece of your ex's pension, but you have never seen a QDRO on your behalf, CONTACT OUR OFFICE. We can help.

www.CounselFirst.com or 401-841-5700.