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Why couples facing a high-asset divorce often need a QDRO

On Behalf of | Dec 22, 2021 | Divorce

Couples with higher income and more assets when they get married tend to have more to split up if they get divorced later. High-asset divorces are often far more complex than divorces involving lower-earning couples.

After all, when a couple has more shared property, they have more to fight over as they try to settle their divorce. Your biggest assets could include a family-owned business, marital home and retirement savings. If either you or your spouse has set aside substantial retirement savings or accrued pension benefits during your marriage, then you may need to have your attorney draft a Qualified Domestic Relations Order (QDRO) or file a QDRO drafted by your spouse’s attorney.

When does a couple need a QDRO?

When they need to split retirement savings or pensions

Dividing your retirement savings will mean diminishing what you have to rely on later in life. Not only do you have to split what you have earned with your spouse, but you could also lose some of those funds to taxes and early withdrawal penalties.

A QDRO is a tool that helps you avoid those secondary losses. When you divide retirement savings in accordance with a divorce decree, those penalties don’t apply to the division of the account into two separate funds.

If either spouse then attempts to withdraw from the newly-separated accounts, that could trigger a penalty. Otherwise, provided that the plan administrator and the spouses handle the process correctly, there won’t be any losses suffered when splitting a retirement account or pension in accordance with a settlement agreement or property division ruling from the Kentucky court.

You don’t always need a QDRO even if you share retirement-savings

Creating a QDRO is only a necessity if you want to actually divide the retirement account itself. If you would prefer to use its value to justify other property decisions, like one spouse keeping the family business or marital home, you will not need a QDRO to split the actual account.

There are many potential ways to handle retirement accounts when you divorce, and choosing the right solution can set you up for the best possible future. Handling a high-asset divorce properly often requires a careful focus on the long-term implications of your choices.