Divorce is a challenging process that may be financially and emotionally exhausting for everyone involved. Determining what happens to a pension in a divorce is one of the trickiest issues to overcome. If you want to make sure both parties receive a fair deal when it comes to the division of assets during a divorce, you must be aware of your rights and understand how pensions are distributed.
In this article, we’ll go over how pensions are divided during divorce, the significance of obtaining a Qualified Domestic Relations Order (QDRO), and how employing a qualified financial advisor or lawyer can ensure everything goes smoothly.
Check if it qualifies as marital property
The first stage in dividing a pension during a divorce is to decide if it qualifies as “marital property,” in which case it must be divided. According to your state’s laws, this could imply that any retirement accounts or pensions accrued during the marriage are liable to being shared equally between the two spouses, regardless of who owns them or who contributed the most money to them.
Hire a financial advisor or attorney
Your next step is to hire an experienced financial advisor or attorney to help you navigate the process. They can help you understand the different options available for dividing up your pension and ensure everything is done correctly. They can also help you negotiate any disputes or disagreements between the couple, as well as assist you in understanding the long-term financial implications of splitting a pension.
Get a QDRO
Next, a “Qualified Domestic Relations Order” (QDRO) must be obtained. A QDRO, which requires approval from the court and both parties, specifies how much of the pension should be split between the couple. Which spouse receives the pension money and when will also be determined by the QDRO. When creating the QDRO, remember that the spouse who will be receiving the pension will be liable for paying taxes on it.
Study tax regulations and rules
Pensions are often subject to early withdrawal penalties if they are not handled correctly. That is why it’s important to be aware of the rules and regulations before you make any decisions. An experienced financial planner or attorney can help you understand these rules so you don’t end up facing hefty penalties.
Get help from professionals
Splitting a pension in divorce can be stressful and complicated, so don’t hesitate to reach out for help if you need it!
If you’re going through a divorce, you don’t have to go through it alone.Our team is here to help you every step of the way.
At Purposeful Wealth Advisors, we work closely with divorce attorneys, accountants, and other dedicated professionals to arrive at comprehensive solutions for our clients.
Contact us to know more about our services!