In previous decades, the family home was usually the largest asset to be considered for property division in divorce. But with the rise in divorce among baby boomers, retirement accounts with significant assets can even exceed the value of the home. This makes dividing pension plans and retirement accounts all the more important.
In Utah, the division of marital property is meant to be fair and equitable, which does not mean that property will necessarily be divided straight down the middle. When splitting a pension or 401(k) plan, certain procedures have to be reviewed, and it is a good idea to consult with your attorney in the process.
For private-sector pension plans and 401(k) accounts, a Qualified Domestic Relations Order, commonly called a QDRO, is used to tell the administrator of the plan how to split and withdraw one spouse’s portion of the funds. Taking money out of such an account could incur a penalty, so it is important that the QDRO is handled the right way.
State, federal and municipal retirement plans are not covered by a QDRO, which is only for private-sector plans, and each of these types of plans may have a variance of rules.
For example, the plan may allow for a single payment of your portion of the fund, or your portion may be paid out over time. This is an important aspect to consider, especially if you intend to use the 401(k) or pension money to cover costs soon after the finalization of the divorce.
The key is to plan the QDRO transfer during the divorce process. In Utah, once matters of property division are settled, revisiting them is an option only in rare situations, so it is best to plan now for your future financial stability.
Loretta Hutchinson.