Three Tips on Split/ting the 401(k) in Divorce

Forget the emotional workout that divorce provides….watch out for the paperwork workout!

Ask someone who’s been through divorce:  There is a lot of searching, collecting, requesting, gathering, compiling and more that must be done!   This drill also extends to pensions and certain retirement accounts, such as 401(k)’s.

Also ask a divorcee how much of the legal bill involved requests for documents, follow-up on those requests, and plain old nagging…the number will probably astound you!   So, how can you address the 401(k)’s proactively to get at the paperwork workout without incurring legal fees associated with nagging?   Here are three tips:

1.    Call the 401(k)’s “Plan Administrator.”    Ask the employer with whom each 401(k) is associated for the Plan Administrator’s number (usually, this involves calling HR – don’t hesitate to call HR, they get these kinds of calls all of the time).  From the Plan Administrator, request and follow-up with an email these three items:   the 401(k)’s guidelines for preparing the QDRO (sounds like “quad-row”), a model copy of a QDRO for this 401(k) and any fee structures for filing a model QDRO instead of a non-form QDRO, and any checklist associated with preparing a QDRO for this 401(k).     Do this early and for every 401(k) (or even any pension) that either spouse holds.

2.   Contact a CPA, a Financial Planner, or a Tax Attorney (and maybe even a CDFA) about the tax consequences and liabilities.   Ask your CPA and your financial planner for advice.  Your age, income bracket, and the kinds of assets in the 401(k) can affect how both spouses may view the 401(k).   For example, a 401(k) may have a “liquidated value” of $50,000 (what the financial statement usually reflects).  However, what is not reflected in that number is what Uncle Sam is going to take if you DO liquidate the account.  Suddenly, that $50,000 could plummet to $30,000.00 if you don’t play your cards correctly!  Know what you’re doing before you do it!

3.  Assess the 401(k) as one piece of the bigger puzzle of dividing the marital estate.  Before you negotiate a division of property, understand what it might mean to keep the 401(k) intact and what it might mean to divide it into two parts of various sizes.  Would it make sense for one spouse to keep all of the equity in the house while the other spouse keeps the 401(k) “as is” (and avoid fees associated with drafting and filing a QDRO, as well)?  Would it make sense to give a portion of the 401(k) to the other spouse in exchange for larger helpings of something else in the marital estate (keep the boat and the lake house)?  There is some good news with 401(k)’s providing greater options and opportunities for dividing the marital assets.


The bottom line is that the paperwork burden in divorce alone can be overwhelming.  What those documents mean may seem completely out of reach when you are on a litigation timeline.  As such, plan ahead to take small bites at it, and you will be more confident, more prepared, and more willing to move forward without unnecessary self-doubt (and paying a law firm to nag you).



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