When dividing assets in a divorce, most people think about the division of their current assets, such as money in bank accounts, investments, and real estate property. When they find out that their soon-to-be-ex may be entitled to a share of their retirement benefits, it can derail any future retirement plans they may have had.
In most cases, the benefits that may fall under “marital assets” are those that were earned during the couple’s marriage. If the couple was only married a short time, the amount may not add up to much, but in situations where the couple was legally married for years, that division can have a significant impact on the amount of retirement benefits the person ends up with once their ex-spouse is awarded their share.
Qualified Domestic Relations Order
In order to ensure that retirement benefits are paid out after a divorce, the spouse who is awarded a portion of the benefits must file a Qualified Domestic Relations Order (QDRO) with the relevant employer or retirement system. This is a court order that requires the employer or retirement system to pay out the benefits to an alternative payee, that is, someone other than the worker or employee.
Individual Retirement Accounts (IRA) are paid out differently and do not generally require either a QDRO for distribution. Spouses may also be able to do transfers from one spouse’s IRA account to the other spouse’s IRA account without taxes or penalties being taken out. It is also possible for a spouse who is receiving the entire IRA account to change the name on the account and not worry about transfers.
Most employers and retirement systems will also not pay out benefits to a former spouse before the employee of record makes a claim for benefits. This means that a spouse who is granted a portion of the retirement benefits may have to wait years before receiving the benefits.
Social Security Benefits
Social Security benefits are not directly affected in the same way as pensions, IRAs, and other retirement accounts. Spouses can usually claim a portion of Social Security benefits based on their husband or wife’s working records. After a couple divorces, the former spouse can still claim benefits based on a former spouse’s working record if they meet certain qualifications and the marriage lasted more than ten years. When a former spouse claims these benefits, it does not reduce the benefits received by his or her former spouse.
Contact a Hudson Valley Divorce Attorney
Divorce finances can be complex when it comes to dividing up the marital estate. To ensure that your rights are protected, and you get your fair share of the estate, make sure to have a skilled Rockland County divorce lawyer advocating for you. Call Law Offices of Robert S. Lewis, P.C. at 845-358-7100 today to schedule a free and confidential consultation.