Retirement funds are often the largest assets owned by a married couple in Tennessee. Therefore, it comes as no surprise that dividing these accounts can be complicated during a divorce. According to a survey of divorce attorneys, retirement accounts are one of the three most difficult issues to resolve at the end of a marriage. The other leading concerns were also financial — business division and alimony payments.

People spend years building up their retirement accounts, so they may be hesitant to sacrifice even a portion of these funds. However, reaching an agreement is not the only issue at stake when it comes to dividing retirement funds. It’s also important to go through the process correctly in order to avoid significant costs, including penalties, fees and taxes. The divorce decree is not sufficient to divide workplace accounts like 401(k)s and pension plans. Instead, a special court order called a qualified domestic relations order (QDRO) must be obtained in order to direct a plan administrator to divide a retirement fund. A separate QDRO is required for each fund that will be divided.

It is also important to make sure that the QDRO is accurate, reflecting the agreement reached between the parties. If the funds will be moved to a rollover IRA, this must be specified in the order. In addition, the QDRO should include a percentage distribution rather than a dollar account. That’s because the shifting value of the funds may lead to an inequitable outcome.

Couples who are going through a divorce may be especially concerned about the financial effects of splitting up. A family law attorney can help a client protect key assets and achieve a fair agreement on divorce issues like property division and spousal support.