Kline Legal Group P.L.C.

High-value retirement plans can be a major divorce issue

Michigan couples going through divorce should use due diligence when dividing retirement accounts. As the fruit of a lifetime of work, these accounts are often the largest assets held as marital property. Both parties may be reliant on these funds for their financial health and future. This is one reason why 62 percent of divorce attorneys surveyed in a 2016 study rated retirement funds as the most contentious issue faced by their clients.

The issues related to property division can get more challenging when the retirement accounts are more valuable. For example, a high-asset divorce involving multiple retirement funds requires a high level of precision and attention to ensure the distribution is handled properly. Otherwise, both parties could face significant financial losses in taxes, penalties and fees.

Many retirement accounts are based at the workplace of one spouse. In order to distribute these accounts following a divorce, it is necessary to secure a qualified domestic relations order from the court. While these orders should always reflect the division agreed upon as part of the divorce settlement, they must be requested from the court. For every retirement account that should be divided in the divorce, a separate QDRO specifying the distribution is needed.

In a high-asset divorce, a family law attorney could draft a QDRO and have it approved and issued by the court. The lawyer can work directly with the plan administrators involved in order to ensure that the distribution is processed in line with all relevant regulations and reflecting the divorce agreement.

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