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What's The Big Deal with Dividing My Retirement Account?

Oftentimes the retirement account is the largest asset of the marriage to be divided. It is also an area where big mistakes are most often made with divorce lawyers and where clients simply just do not pay attention. First of all there are many different types of retirement benefits to be divided. To divide most standard retirement plans you need something called a Qualified Domestic Relations Order ("QDRO" for short). A QDRO is a specialized court order that directs a retirement plan to pay retirement benefits to a spouse of an employee. QDROs are used most often in divorce cases to divide up retirement benefits earned during the marriage.

Where are mistakes made? The most common mistake is an agreement made between spouses to divide up a retirement plan that cannot legally be divided. This occurs because your divorce lawyer has not looked into the terms of your specific retirement plan enough to realize that some retirement plans cannot be divided. In other words many state and local government retirement plans will not ever pay retirement benefits to someone other than their employee regardless of any court order that is entered. Likewise, some insurance companies offer termination benefits in lieu of retirement. Termination benefits also cannot be divided by a QDRO. Other common mistakes include the lawyer not following up after the divorce to make sure that the retirement plan has been divided, not including cost of living adjustments to the alternate payee spouse in the QDRO, and using numbers instead of percentages for what the payee spouse is entitled to receive in the QDRO. Using numbers instead of percentages can result in a big gain or a big loss to the payee spouse which then results in an unequal property division which usually isn't what the parties intended.

It is impossible for a divorce lawyer to know and be aware of how each and every different type of retirement benefit can be divided. This is where you come into play. What should you do? Ask your divorce lawyer at the first appointment about their experience in dividing up retirement accounts. Make sure your lawyer has experience or is willing to call in another attorney to handle this aspect of your case. Make sure you get all information related to dividing up your retirement plan to your attorney early in the process. Call your benefits person and talk to them about division of your retirement account. Learn as much as you can on your own. If you are the payee spouse demand that your attorney get this information through formal discovery from your spouse's attorney. Start working on division of the retirement account early. Oftentimes it takes months to work out the division of the retirement account with the plan administrator. Seek early approval of the QDRO long before your divorce is final so that if there are problems they can be dealt with before you are divorced.