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Property division: Retirment accounts require expertise to split

Many Pennsylvania couples who are divorcing may face legal battles over their retirement accounts. The battle is often significant because a couple's retirement account or accounts often reflect their largest financial nest egg. Any individual approaching divorce and beginning property division negotiations will want to make sure he or she has secured the right family law attorney to ensure a smooth and penalty-free transfer of retirement assets.

There are legal procedures that must be followed in order to ensure an adequate and fair division of retirement accounts. Traditional retirement pensions and workplace 401(k)s require a separate court order from the divorce judgment to specify the desired division. The court order is called a qualified domestic relations order (QDRO). If the QDRO or division of retirement accounts is not handled properly, one or both spouses could suffer significant tax penalties. In addition, one spouse could unintentionally receive more of the retirement assets than the other if not properly specified. 

When filing a QDRO, the retained attorney usually contacts the account administrator to inform the administrator of the pending court order and specifications requested. Couples are usually encouraged not to change a beneficiary prior to the divorce finalization because if an unexpected death occurs before the divorce is final, the spouse may not be entitled to any of the retirement assets. Couples are also encouraged to specify a percentage regarding the division of assets versus a specified dollar amount because market changes could change the asset amount to more or less, resulting in one of the spouses potentially losing retirement income.

Individual retirement accounts do not require a QDRO, but the division of one is still encouraged to be handled with care to avoid tax and early withdrawal penalties. No matter the type of retirement account possessed by a couple, the right Pennsylvania family law attorney can assist with the sensitive property division. Attorneys also remain available and an asset if questions arise after the divorce finalization and splitting of property.

Source:, "How to avoid mistakes dividing up 401(k) assets in divorce", Sarah O'Brien, March 7, 2018

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