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How Retirement Assets May Be Divided in a Divorce

A retirement account can be among the most substantial assets that a person accrues over a lifetime. Although such accounts are individually owned, they may be treated wholly or partly as marital property when a couple gets divorced. That means a divorce court will divide these accounts and their vested benefits equitably between the spouses.

In Michigan, equitable distribution does not mean that the assets will be split 50/50, nor does it mean that each partner will simply keep the assets in his or her name. Rather, the court will decide on a fair division by considering a variety of factors, including:

  • Length of marriage
  • Age of the parties
  • How the parties contributed to the marriage
  • Lifestyle expectations of the parties

If you and your former spouse agree to keep your respective retirement accounts, then the distribution process can be fairly simple. If, however, an account needs to be split and certain retirement assets need to be transferred from one party to the other, then the process can become more complicated and may require obtaining a qualified domestic relations order (QRDO).

A QRDO is an order from the court confirming that a spouse is entitled to receive a specified portion of the other spouse’s retirement assets. Whether such an order is required depends, in part, on the sort of account in which the assets are held. For IRA accounts, money can be rolled over from one spouse’s account to another. For money held in an employer-sponsored account, like a 401k, a QRDO is usually necessary to instruct the plan administrator on how to transfer assets and avoid the tax consequences for such a transfer. While a QRDO may sometimes direct a plan to transfer assets immediately, it may alternatively keep the retirement assets in one account and instruct the plan administrator to distribute the benefits in a certain manner to both spouses when they reach retirement age.

When retirement assets are of high worth, they can be a significant source of income for the divorcing spouses. A skilled divorce attorney can help ensure that a spouse receives their fair share of those assets, such as by obtaining expert testimony as to the present and future value of the retirement accounts.

At Dawson Family Law, PLLC, we help Michigan clients to consider whether the splitting of retirement assets will be an aspect of their divorce and, if so, how best to proceed. To talk with an attorney about the steps you should take, call our Sterling Heights office at 833-671-4445 or contact us online.

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