Keeping one's retirement assets intact is critical for creating the most financially stable future possible. This is why the division of retirement assets can be so unsettling for those going through the divorce process in Massachusetts and elsewhere. A particular aspect of the division of retirement benefits that can especially cause confusion is the splitting of a 401(k).
If one spouse has a 401(k) through his or her employer, the other party can get a percentage of it by having an attorney create a qualified domestic relations order, commonly known as a QDRO. The spouse who would like to claim some of the other party's retirement benefits would be wise to review the QDRO with the attorney prior to its submission to the court. This will help to ensure that the QDRO terms reflect the divorce agreement's intent.
Furthermore, the spouse receiving the retirement funds would be wise to avoid agreeing to a beneficiary change before the marital breakup has been finalized. This is critical because as long as the two parties are still legally married, the owner of the account cannot name anybody other than his or her spouse without the spouse's approval. Otherwise, if the future ex ends up passing away prior to the finalizing of the divorce, the spouse who was supposed to receive the retirement benefits may no longer be entitled to receive them.
Dividing property during the divorce process can be tricky, especially when retirement benefits are involved. The wrong move can unfortunately cost a divorcing individual a lot of money in tax-related penalties. However, an attorney in Massachusetts can provide the guidance needed to tackle the distribution of retirement assets in the most personally favorable manner possible.
Source: cnbc.com, "How to avoid mistakes dividing up 401(k) assets in divorce", Sarah O'Brien, March 7, 2018