Deciding to file for a divorce is a decision that many Massachusetts couples do not take lightly. This decision requires careful consideration and planning. Part of that planning is property division. Many couples discover that dividing their physical and financial assets can be incredibly difficult, especially 401(k) or similar accounts.
During the divorce proceedings, a spouse may be informed that he or she might be entitled to a portion of the other spouse’s retirement account. An ex-spouse can have documents drawn up to have his or her share of the funds transferred into an IRA or another account. It is also possible in some circumstances for an ex-spouse to receive the funds directly as cash.
There are some details that divorcing couples may wish to keep in mind while trying to divide their assets. The person who is hoping to receive the funds from their former spouse’s retirement account should not change his or her beneficiary before the divorce is finalized. Ensure that all of the account amounts and percentages to be received are well-documented.
Of course, there are other options for ex-spouses to transfer these funds. The account owner may choose to withdraw the funds and give them to the ex-spouse personally. However, using this method allows the funds to be taxed as they normally would and withdrawal penalties would also apply. A qualified domestic relations order (QDRO) is required in order to receive these types of retirement funds without an early withdrawal penalty or immediate tax consequences.
Discussions concerning property division can be difficult for a number of different reasons. Financial accounts, especially, can be a point of contention for many couples. Couples in Massachusetts who are considering filing for divorce may wish to seek the advice of a local attorney before proceeding.