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How are Retirement Assets Divided in Divorce?

How are Retirement Assets Divided in Divorce?

When you choose to pursue a divorce, you’ll have to divide the property you and your spouse have obtained during your marriage. While most people think this includes things like their marital home, cars, furniture, and financial assets like their bank accounts, what they don’t often consider is their extended assets, including investment portfolios and retirement savings accounts that could be substantially large. When you consider that you not only have to divide the assets already accrued but possibly the ones you will also accrue later, you can imagine this division process is complicated. On this blog, we’ll try to clarify how this division process works to help you better prepare for it.

Why Dividing Retirement is ImportantCounting bills in a wallet

In terms of value, a retirement account could be the largest asset a married couple owns, particularly if they’ve been aggressive with their savings and built it up over a considerable amount of time. It could even be larger than the value of the family home. So as you can imagine, it’s important not to forget this asset when going through the property division process.

But how do you divide something that’s not only that substantial, but is also locked away in a specialized account and has substantial tax implications looming over it? If you don’t handle these assets properly, you could wind up losing a bundle of value to the government when they levy a heavy tax burden on you, so there are a few things you can and should do: have an Oklahoma City divorce attorney on your side who can guide you around these potential tax pitfalls, and utilize a Qualified Domestic Relations Order.


A Qualified Domestic Relations Order (QDRO) is the most valuable tool for protecting your interests in the continual accrual of assets into a retirement account. To put it simply, a QDRO (sometimes pronounced “quad-row”) is a court order that protects your interests in retirement accounts.

These orders are what employers, creditors, and other institutions need in order to set up an arrangement for distributing retirement account assets. Essentially, using a QDRO, you can take an equitable portion of the already-existing retirement accounts and transfer them into your possession, most likely in to an account in your name of the same type. This same QDRO can then order your spouse’s employer to deposit a portion of their retirement benefits into your account if the court orders such an arrangement.

It’s important to note that QDROs only work for plans that are IRS tax-qualified and covered by the Employee Retirement Income Security Act. They cannot be used to divide things like military and government pensions, IRAs, or SEP assets. However, that doesn’t mean these assets are “divorce-proof;” they can and are still divided during a divorce, just utilizing a different set of laws.

What if Both Spouses Have Retirement Funds?

It’s becoming more common for both spouses in a marriage to have built a substantial career, and that means it’s not uncommon for both spouses to have accumulated assets into a retirement account. When this is the case, both spouses are entitled to a portion of the other’s assets that were accumulated during the marriage. Because this can become complex quickly, it’s strongly advised you reach out to an attorney for assistance to avoid making any potentially serious mistakes that could wind up costing you tons in tax liability or lost assets.

Call Smith Simmons, PLLC today at (855) 973-8877 to request a case evaluation!


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