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Successfully handling retirement funds in a divorce

For couples who decide to divorce in Colorado and elsewhere around the country, retirement funds usually represent their largest assets. As a result, people may be especially concerned about how they will be divided, both for their future financial goals and avoiding unwanted and unnecessary taxes, penalties and other fees. If individuals do not follow the proper steps to divide their accounts, they could face substantial costs that could otherwise be avoided. These funds are already a contentious issue in many divorces. A survey of divorce lawyers found that retirement accounts, along with alimony and business interests, were one of the top three causes of conflict.

Even when both parties have arrived at an agreement for property division in the divorce, it is important to abide by regulations governing the division of retirement funds. For example, 401(k)s and other qualified workplace accounts, such as pension plans, can only be divided with a qualified domestic relations order (QDRO). While a QDRO is based on the terms of the divorce decree, the decree itself is not sufficient to divide this kind of account. Instead, an attorney must secure an additional court order that specifies the division of the funds.

It is important for people to work with their divorce attorneys to make sure that the QDRO is accurate before being issued by the court. When multiple accounts need to be divided, a separate QDRO must be issued for each fund. In addition, if individuals are to take the funds in a rollover IRA, this must be specified as part of the order.

When people decide to divorce, they may face significant financial effects that linger long after the end of the marriage. A family law attorney can work with a divorcing individual to help protect his or her important assets and negotiate a fair settlement on spousal support and property division.

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