If you and your spouse are contemplating getting a divorce in Ohio, one of the big concerns you may have is about how to accurately split up your marital assets and debts. Like many other couples, your retirement account savings may be among some of your most valuable assets. The thought of losing half of these savings can be difficult to consider but even worse is the thought of paying high amounts of taxes or penalties by withdrawing money form a 401K account prematurely.
Fortunately, you may be able to avoid these losses by having a qualified domestic relations order created. As explained by the United States Department of Labor, any retirement account that is under the governance of the Employee Retirement Income Security Act of 1974 may require a QDRO when being split in a divorce. The QDRO sets up the spouse who does not own the account as an authorized alternate payee on the account. If you own the account, your spouse may then be able to receive distributions legally.
Regarding taxes and penalties, if your spouse receives money from your account per a QDRO for spousal support or property division settlement purposes, he or she is liable for these costs not you. If, however, your spouse reinvests the money into a new retirement account, those taxes and early withdrawal fees may be able to be avoided altogether.
If you would like to learn more about how to appropriately split retirement assets during a divorce, please visit the qualified domestic relations order page of our Ohio family law website.