Pension Rights After Divorce and QDROs

Pension Rights After Divorce and QDROs - Rochester Hills Divorce LawyerDuring a divorce, the last thing you may be thinking about is your retirement accounts. After all, it’s not something you will need until much later in life. But those retirement accounts could become a major point of contention within your divorce. Read below to learn more about pension rights after divorce and when a QDRO may be necessary. To learn more about how a Rochester Hills divorce lawyer can help you protect your assets, contact Sumner & Associates, P.C. today.

Retirement Accounts in a Divorce

Your investments and retirement accounts will likely be split like any other assets in your divorce. In Michigan, they would be separated equitably, which does not necessarily mean 50-50. Instead, they may be split according to what the court deems fair and equitable after considering the work and support histories of both spouses.

What types of retirement accounts may be split?

  • 401(k) and 403(b plans
  • IRA and Roth IRA plans
  • Pensions
  • Military pensions
  • Stocks, both vested and unvested

Unless one spouse did not contribute to an account in any way, either monetarily or by supporting the monetary earnings of the other spouse, then these accounts will be split between the two spouses.

Sometimes retirement accounts are divided 50-50. But often they are divided with consideration for other assets that are being distributed in the divorce. For example, if you also have a house, cars, and other property to separate, the court may also consider those when making decisions about your retirement accounts.

What Is a QDRO?

A QDRO stands for a “qualified domestic relations order.” This legal document splits the value of retirement and investment accounts in order to avoid tax consequences. The court will use a QDRO to determine exactly how much each spouse will get of the accounts that need to be separated. The benefits are then typically paid out at normal retirement age.

A QDRO removes uncertainty and establishes pension rights after divorce. However, if one of the spouses dies prior to retirement, the order can also determine what happens to the remaining benefits. If a spouse decides to continue working past retirement age, the other spouse can still utilize their benefits.

What If Retirement Funds Were Acquired Prior to Marriage?

If retirement or investment funds were acquired prior to marriage, then the original or principal amount may be considered the entire property of the spouse who originally made the investment. If the court finds that those funds are nonmarital property, then one spouse can keep 100% of the amount. However, any net gains or interest that is accrued during the marriage is likely to be considered marital property to be divided in the QDRO.

What Is the Retirement Equity Act?

The Retirement Equity Act is a federal law that establishes a method of dividing pension benefits between parties. It uses the QDRO to order specific dollar amounts to each party in a divorce.

Contact a Rochester Hills MI Divorce Lawyer Today to Learn More About Pension Rights After Divorce

If you have questions about pension rights after divorce or a QDRO for your retirement and investment accounts, speak to a family law attorney at Sumner & Associates, P.C. today.