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Using a QDRO to divide a 401(k)

When a Kentucky couple gets a divorce and one of them has a retirement account, it will likely be considered part of the marital assets that must be divided. However, if a person wants to give some or all of a 401(k) to a former spouse, that 401(k) cannot simply be assigned to another person. Furthermore, a withdrawal and distribution to another person may incur tax and penalties.

In order to avoid these taxes and penalties, it is necessary to use a document called a qualified domestic relations order. With a QDRO, the agreed-upon portion of the retirement account can be transferred into the other spouse's IRA.

QDROs can also be used to facilitate the transfer of funds for support obligations. For example, a parent who owes child support can use a QDRO to pay that support from the 401(k) to the child's legal guardian.

The end of a marriage means a number of things must be negotiated or decided by a judge. In addition to property division, of which splitting a retirement account may be one part, there may also be child custody, child support and alimony. Some decisions made at the time of the divorce can be changed later if necessary. For example, if the income of a parent who pays child support changes, that parent might need to request a modification in child support based on a change in circumstances. However, if a couple is unable to negotiate an agreement regarding property division, a judge may make a decision that the couple must abide by even if they are not satisfied with it. Therefore, even if the divorce is contentious, a couple may want to make an effort to negotiate a divorce agreement with the help of their respective lawyers rather than going through litigation.

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