Divorce settlements can be overwhelming and stressful. Spouses can fight over little things. And if one spouse has developed solid 401k funds, these benefits will be an important focus of a settlement. Although a spouse who owns the funds will want to protect it for their survival after a divorce, their spouse can legally claim all or part of it in a divorce settlement. Often, the fund owner must look for a way to make an equitable division of their 401k funds. Are you wondering about how your 401k account will be handled during your divorce? If so, you must consult a Ridgeland family law attorney to know the answer. Your lawyer can explain how the process of property distribution may work in your case and let you know which assets you may be able to legally retain.
Funds contributed to a 401k account during a marriage are marital property and must be divided equitably during a divorce. But, how much the other spouse can get from the funds depends on the way their overall marital assets are divided. If you are ending your marriage, there are basic rules that apply in terms of dividing retirement accounts in a divorce.
Seeking a Court Order
If you want to get your share of a 401k account as you finalize your divorce, you need to get a court order to permit it. A judge will have to sign off on a Qualified Domestic Relations Order or QDRO to confirm your right and your ex’s right to a part of the money. Also, a separate order for every other kind of retirement benefits or plan must be obtained. The order should state the amount the receiving spouse will get.
The spouse who receives 401k benefit in a divorce can request a direct transfer to avoid paying a penalty on this money. also, they can wait to take their share until the retirement of the owner. This way, they could make regular payments or get a lump sum. Leaving their money on the plan allows them to get required minimum distributions once they reach the age of 70 ½ to avoid a penalty. Another distribution option the spouse has is to cash out their portion of the balance. With this, they can have great access to money, although this can be a costly option. If they are 59 ½ years old at the time the payout has been made, they might need to pay income taxes on the money, together with a 10 percent penalty for early withdrawal.