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Complexities of dividing retirement accounts in a gray divorce

On Behalf of | Mar 19, 2021 | Divorce

Dividing retirement accounts presents a particular challenge when an older California couple files for divorce. There are a number of factors that those involved in a so-called “gray divorce” need to bear in mind regarding the division of retirement accounts.

Types of retirement accounts at issue in a gray divorce

The most common retirements plans that end up at issue in a gray divorce, or a divorce involving older spouses, are 401(k)s, different types of qualified pension plans and independent retirement accounts, known as IRAs. There are different mechanisms utilized to address these retirement assets during divorce negotiations.

Certain retirement account assets and a qualified domestic relations order

A 401(k) as well as certain types of qualified pension plans are addressed in divorce proceedings through an order of the court that is separate and distinct from a divorce decree. This is known as a qualified domestic relations order, or QDRO. The distribution or division of an IRA can be addressed in the divorce decree itself.

Two methods to divide applicable retirement assets via QDRO

Two strategies exist through which you can divide a 40 (k) or a qualified pension plan via QDRO. First, a spouse can be awarded a separate interest in the balance of a 401(k) or qualified pension plan. Second, a spouse can be permitted to share in the payment of benefits.

Due to the negative consequences that can follow from improperly conveying retirement account assets in a divorce, professional assistance in the process is strongly encouraged. California divorce lawyers who have extensive experience in dealing with the challenges and complexities of gray divorces may help spouses finalize their settlements.