Posted on: 11th Oct, 2006 03:24 pm
If any one can tell about the division of retirement plan in divorce.
Hi Erlbaum,
Retirement benefit plans are treated as community property and at the time of divorce the retirement plans are divided. And as a spouse you legally have the right to part of the balance.
Retirement benefit plans are treated as community property and at the time of divorce the retirement plans are divided. And as a spouse you legally have the right to part of the balance.
Hi Erlbaum,
At the time of divorce there are two options available; one is the buy-out of the current valuation of the pension plan and the second is division.
In the first option you can take the current value of your interest in the retirement plan to be something of equal value like cash or some other asset.
While if the retirement account is to be divided then an order which is known as the Qualified Domestic Relations Order or QDRO is necessary for transferring your share in the retirement funds of your spouse.
Thanks
James
At the time of divorce there are two options available; one is the buy-out of the current valuation of the pension plan and the second is division.
In the first option you can take the current value of your interest in the retirement plan to be something of equal value like cash or some other asset.
While if the retirement account is to be divided then an order which is known as the Qualified Domestic Relations Order or QDRO is necessary for transferring your share in the retirement funds of your spouse.
Thanks
James
Hi Erlbaum,
Let me add some points about the QDRO. It is a court order for payment of your share of pension plan benefits of your spouse.
Even if the divorce decree mentions that you have rights on your spouse's retirement funds, your divorce lawyer will have to formulate the QDRO form and get it approved by the retirement plan's plan administrator.
Let me add some points about the QDRO. It is a court order for payment of your share of pension plan benefits of your spouse.
Even if the divorce decree mentions that you have rights on your spouse's retirement funds, your divorce lawyer will have to formulate the QDRO form and get it approved by the retirement plan's plan administrator.
Hi Erlbaum,
The retirement plan assets in divorce are divided on the basis of rules that are applied on the basis of the type of plan available. If it's an independent retirement account or IRA, then the retirement plan assets are divided on the basis of the court approved divorce decree or legal separation agreement.
The division is a non-taxable transaction and it can be either a transfer (tax-free movement of assets from one retirement plan to a similar plan) or a rollover (tax free movement of assets from one type of retirement plan to another type). The spouse receiving the assets should consider the assets as his or her own and he/she is solely responsible for adding any contributions later on into his or her income for the year the distribution occurs.
The divorce decree used to distribute IRA assets must address the retirement assets and give a detailed information on how the assets will be divided. The decree mentions clearly whether the assets will be shared equally or given to one person as a whole, or whether the assets will not be shared equally.
The person giving up the assets does not have to pay any tax or penalty of any distribution made later on. The spouse receiving the assets will be responsible for paying the taxes and penalty resulting from future distributions.
Regards,
Jessica.
The retirement plan assets in divorce are divided on the basis of rules that are applied on the basis of the type of plan available. If it's an independent retirement account or IRA, then the retirement plan assets are divided on the basis of the court approved divorce decree or legal separation agreement.
The division is a non-taxable transaction and it can be either a transfer (tax-free movement of assets from one retirement plan to a similar plan) or a rollover (tax free movement of assets from one type of retirement plan to another type). The spouse receiving the assets should consider the assets as his or her own and he/she is solely responsible for adding any contributions later on into his or her income for the year the distribution occurs.
The divorce decree used to distribute IRA assets must address the retirement assets and give a detailed information on how the assets will be divided. The decree mentions clearly whether the assets will be shared equally or given to one person as a whole, or whether the assets will not be shared equally.
The person giving up the assets does not have to pay any tax or penalty of any distribution made later on. The spouse receiving the assets will be responsible for paying the taxes and penalty resulting from future distributions.
Regards,
Jessica.
As far as I have the idea, QDRO or Qualified Domestic Relations Order mostly applies to qualified plans like 401k and 403(b) accounts and not the IRAs, though some courts apply it for the IRAs.
Hi Erlbaum,
If you have a qualified retirement plan account, then you can avail the Qualified Domestic Relations Order. It is a court order under which a spouse or any person who is dependent of the plan holder shall receive the qualified plan assets of the plan holder. A plan administrator should review the QDRO and determine if it meets the requirements.
The person receiving the assets should treat the asset amount as income and pay the required income tax. Amount of money deposited in accordance with the QDRO is exempted from the 10% early distribution penalty that is charged in case of the 401k and 403b plans. A former spouse receiving qualified retirement plan assets may roll over these assets into his or her IRA or other eligible retirement plans. The amount rolled over will continue to earn tax-deferred income and it will not be taxed until and unless the spouse receives a distribution from the plan account.
Thanks,
Caron.
If you have a qualified retirement plan account, then you can avail the Qualified Domestic Relations Order. It is a court order under which a spouse or any person who is dependent of the plan holder shall receive the qualified plan assets of the plan holder. A plan administrator should review the QDRO and determine if it meets the requirements.
The person receiving the assets should treat the asset amount as income and pay the required income tax. Amount of money deposited in accordance with the QDRO is exempted from the 10% early distribution penalty that is charged in case of the 401k and 403b plans. A former spouse receiving qualified retirement plan assets may roll over these assets into his or her IRA or other eligible retirement plans. The amount rolled over will continue to earn tax-deferred income and it will not be taxed until and unless the spouse receives a distribution from the plan account.
Thanks,
Caron.