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Are Retirement Accounts and Pension Plans Subject to Division During Divorce in Arizona?
Lawyers from a full-service law firm in Arizona say that property division can create conflict in a divorce. The law requires that divorcing spouses provide information about their financial situation and the assets they own. This includes marital property and separate assets. Separate property is assets an individual gains before marriage, exempt from division.
Marital assets comprise everything acquired during the union, including Pensions, IRAs, and 401(k) plans if the contributions were made during the marriage. Whether you have separate retirement plans from your spouse or one of you has none because they were a stay-at-home parent, you must understand how the division of retirement plans works.
Courts evaluate the percentage of the retirement plan that was funded during the marriage to determine the amount to transfer to the non-participant spouse. After that, it will give orders for the division through a QDRO.
What is a QDRO?
QDRO refers to a Qualified Domestic Relations Order, a judgment, court order, or decree entered by the judge in a family law case such as divorce or legal separation. The order provides instructions for dividing community property, providing child support, and paying spousal support against the pension plan.
Divorce lawyers in Mesa say that a QDRO grants a beneficiary the right to get a share of the owner’s pension plan or retirement account. A QDRO has two parties: the participant whose plan is being divided and the alternate payee who receives a portion of the pension or retirement plan.
How Does a QDRO Work?
Arizona follows the principle of community property, and a QDRO enhances the fair division of proceeds from retirement and pension accounts. The tool also preserves the total value of retirement accounts by splitting them without cashing them out, a process that can complicate taxes, fees, and penalties.
Dividing retirement benefits can be tedious and complicated, but a QDRO can simplify it and enhance accurate division. It works like a court order, outlining the instructions that must be followed under penalty of law. The period for the alternate payee to receive QDRO payments depends on various factors unique to each case.
For example, there could be a need for additional communication between the court and plan administrator to clarify some portions of the QDRO. In other cases, there could be multiple alternate payees, a factor that could extend the time it takes to complete the transfers.
How to Prepare and Complete a QDRO
Before the court can issue a decree that outlines how your retirement and pension plans will be divided, you must prepare a QDRO with the help of your legal counsel. Crucial considerations include the following:
- The types and numbers of accounts you and your ex-spouse hold, hence the number of QDROs you must prepare
- Whether one or more of the retirement accounts subject to division have a sole and separate portion or whether the community interest in the mixed accounts has been calculated
- Whether the QDRO will include a survivor benefit
- Whether the order will be subject to losses or gains
- How the divided funds will be allocated to the alternate payee?
You can make these determinations through an agreement with your ex-spouse or a court order. Creating an agreement beforehand can save you significant time and money during the divorce proceedings. The court will outline the deal in the final divorce decree. Skilled Mesa divorce lawyers can guide you in creating an effective and enforceable order.
Who Prepares a QDRO?
Calculating retirement benefits is crucial because the assets may be significant, and you want to retain your hard-earned wealth by properly accounting for it. The calculations can be complex, and it’s best to involve the expertise of experienced QDRO attorneys to protect your rights and interests.
Once the QDRO is ready, your lawyer can help you file it with the court and have it entered as a court order. It will then be sent to the Plan Administrator to determine if it meets the requirements of the plan it relates to. If it doesn’t, it may be rejected and sent back for modification to address some relevant issues.
Once accepted, the Plan Administrator will implement the division of the retirement or pension plan and distribute the payments according to the instructions and requirements.
What Types of Pensions and Retirement Plans Are Subject to Division?
Mesa divorce attorneys say that the law requires QDROs for the following types of retirement and pension plans:
- 401 (k)s
- 403 (b)s
- Private or corporate-sponsored pensions
- Simplified Employee Pension plans
- Military pensions
- Employee Stock Option Plans (ESOPs)
- Profit-sharing plans
- Roth IRAs
- Individual Retirement Accounts (IRAs)
- Federal government plans
Different rules may apply to the division of these plans. Work with attorneys familiar with the type of plan you want to divide to avoid costly mistakes.
A Skilled Divorce Lawyer Providing Legal Guidance on Division of Retirement Plans
Divorce can be stressful and even more complicated if property division involves retirement and pension plans. You must ensure the QDRO is drafted correctly to avoid loopholes that could make it non-enforceable. The process can be time-consuming and takes the expertise of experienced divorce lawyers in Mesa to do it right.
The Turner Law Firm, PLLC, is a full-service law firm in Arizona with skilled divorce lawyers. We can evaluate your case and provide legal guidance on drafting a QDRO to protect your assets. Our team can also help you navigate other complex divorce issues to help you fight for the most favorable outcome. Let us help you make the right choices to protect your interests and those of your loved ones. Call us at 623-253-8718 to schedule a case assessment.
