Kentucky couples going through divorce must often deal with challenging financial predicaments. This can be especially true when it comes to retirement accounts, which can represent a major asset held by the couple as part of their marital property. When surveyed in 2016, 62 percent of divorce lawyers said that issues about retirement funds are the most contentious for their clients.
Retirement accounts are governed by a number of financial and legal regulations that must be adhered to during a distribution. If the division of a retirement fund is improperly or inaccurately handled, the cost to both parties could be significant as taxes and penalties will be assessed. In addition, inaccurately handling the distribution can lead to an inequitable outcome.
Many retirement funds are based at one spouse’s workplace. In order to distribute these funds according to the divorce settlement, a qualified domestic relations order is needed. The QDRO reflects the terms agreed upon in the divorce; however, it must be issued by the court as an order and does not automatically accompany the divorce decree. Every retirement account going through division requires its own QDRO. Furthermore, such orders are needed for many types of retirement accounts, including 401(k) funds and traditional pension plans.
A family law attorney can draft a QDRO and bring it to the court for approval and issuance. Once ordered, the attorney can work together with the plan administrator to ensure that the retirement accounts addressed in the property division settlement are split accurately and in line with that agreement.