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The role of a QDRO in property division

On Behalf of | Apr 4, 2017 | Property Division |

A Qualified Domestic Relations Order is a document that couples in Orange County might need in order to divide a retirement account in a divorce. This complex document and the process of dividing the account can be costly if people are unaware of the fees and taxes associated with it. However, they might want to work with a certified divorce financial analyst who can explain the QDRO and how it can be used to make the movement of money efficient and less costly.

One scenario might involve a person who is getting $1.1 million from their half of a retirement account. On the advice of the financial analyst, the recipient might set aside $100,000 for fees and taxes. The other $1 million could go into a tax-free rollover, and the recipient could then begin adding to that account or start a new retirement account.

In another property division scenario, without the advice of a financial analyst, people who take a 401(k) with a worth of $225,000 over the home that is worth $200,000 and paid off might think they are getting the better deal. However, they would not be able to access the funds in the 401(k) until the age of 59 1/2 without incurring fees and taxes.

One thing to keep in mind when retirement plans are divided is that the higher-earning party is in a better position to rebuild savings than a lower-earning one. This may affect how the two agree to divide the account if they are negotiating their divorce settlement with the help of their respective attorneys rather than going through litigation.