When a divorce becomes imminent in Tennessee, it is no surprise that spouses may have many questions about how their assets may be affected, especially if they are to ultimately be split between each other. If you are in this situation and you have an employer-sponsored 401K retirement account, you may be especially concerned about preserving your hard-earned retirement savings. If so, you will want to know about the qualified domestic relations order.
As explained by the U.S. Department of Labor, a QDRO is a legal way of establishing another person's ability to receive money from a 401K that is not in their name. If you and your spouse have agreed to split the assets in your 401K account, the use of a QDRO will mean that your spouse can receive money from the account directly rather than you taking a distribution and then giving it to them. The benefit here is that you avoid any tax responsibility for the money that is distributed. In addition, you may also avoid having to pay early withdrawal fees.
If your partner puts any received money into another retirement account, taxes may also be avoided for them. In other words, a QDRO can be a valuable way of helping you avoid losing more of your retirement savings that you absolutely have to.
If you would like to learn more about how to handle 401K and other similar retirement accounts during a divorce, please feel free to visit the qualified domestic relations order page of our Tennessee family law website.