Dealing with your 401(k) in your divorce

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Dealing with your 401(k) in your divorce

| Jan 4, 2021 | Divorce |

Like most people in Texas, you likely believe yourself to be completely prepared heading into your divorce proceedings, And, again like most (including many of those we here at the Law Office of Brian Bagley work with), there will inevitably be some aspects of your case that catch you completely by surprise. 

The fact that your 401(k) is subject to property division likely falls among those surprises. Given that contributions to that account made during your marriage come from marital income, it thus makes sense that the court views them as marital assets. Once you understand this point, your thoughts no doubt turn to the handling of your account during property division proceedings. 

Understanding the role of a QDRO

In most divorce cases, the court issues a Qualified Domestic Relations Order. This order authorizes your 401(k) plan sponsor to make a distribution to an alternate payee (your ex-spouse, in this particular situation). With a QDRO in place, your plan sponsor can then divide your account in two, with you and your ex-spouse retaining management control over your respective accounts. 

Keeping your full 401(k)

However, depending on how near (or far) you are from retirement, the prospect of dividing up your 401(k) may greatly concern you. You should know, then, that the 401(k) Help Center proposes a different solution: keeping your full 401(k) account. Yet doing this does not come without cost. Indeed, you need to convince your ex-spouse to forego their interest in your 401(k). Doing so will likely require you to relinquish your claim to another marital asset of comparable value in exchange. 

You can find more information on dealing with complex property division topics by continuing to explore our site.