How to Divide up a 401(k) After a Divorce

By Tom Streissguth

The laws of each state govern the division of property in a divorce. Although many divorces result in a 50/50 division of assets, family circumstances may bring about a different percentage, depending on the judgment of the court. If you have saved money in a 401(k) arrangement with your employer, the court will assign a portion of those assets to your spouse during the proceedings. It's important to follow the proper steps and obtain a valid QDRO to avoid IRS penalties.

Step 1

Contact your 401(k) administrator and explain that you anticipate a divorce case that will involve a division of the plan's assets. Ask for a model Qualified Domestic Relations Order. This will help you in a proper division of assets and avoid the 10 percent early-withdrawal penalty that the IRS will assess against any disbursements from the account. You use the model order to make sure the QDRO issued by the court in your case is complete and valid.

Step 2

Provide your administrator with the court-ordered division of assets or QDRO. To be valid, the QDRO must have your name and current address, the name and current address of your spouse or alternate payee, the percentage of the assets to be disbursed to your spouse, how the payments will be made and how the percentage division has been determined.

Divorce is never easy, but we can help. Learn More

Step 3

Obtain your administrator’s verification of the QDRO. The administrator must account for all payments to your spouse, state the procedures used to divide the assets and notify you of his decision on the QDRO’s validity. If your plan is self-administered, you still must draw up these documents and include all the required information. If this is not done, the IRS will assess a 10 percent penalty for early distributions (as long as you and the alternate payee are under the age of 59-1/2).

Divorce is never easy, but we can help. Learn More
How Is a 401(k) Split in a Divorce?
 

References

Related articles

How to Divide Pension Income in a Divorce in Illinois

Illinois couples must split their assets as part of their divorce, and these assets can include many types of retirement plans as well as assets like cash, real estate and personal property. If a divorcing couple cannot reach agreement on how to divide a pension or other asset, the court must decide the issue for them.

Pension Law for a Georgia Divorce

Georgia courts might consider retirement plans as marital property, which is subject to equitable distribution in a divorce. However, whether or not your plan is distributed in this manner depends on several factors, including when you acquired the pension and the financial needs of you and your spouse at the time of divorce.

Who Pays the Taxes When Early Annuity Distribution Is Part of a Divorce Settlement?

The spouse who receives the early distribution of an annuity in a divorce settlement is responsible for paying the taxes and any penalties. There are, however, ways to transfer the asset that avoids tax penalties. Also, the divorcing couple can consider the tax implications when negotiating their divorce settlement.

Get Divorced Online

Related articles

The 401(k) and Divorce Law in Arizona

Community property states, such as Arizona, view assets acquired during a marital relationship as equally shared ...

Divorce Laws in Indiana Concerning Pensions

When Indiana spouses divorce, they can agree about how they want their property divided or the court will divide it for ...

How to Divide Deferred Compensation Accounts in a Divorce

Dividing tax-sheltered assets, such as deferred compensation accounts, in a divorce requires care. Many couples realize ...

Can I Postpone an Absolute Divorce Until the QDROs Are Signed by a Judge?

A qualified domestic relations order, often called a QDRO, is a special document that divides up retirement accounts as ...

Browse by category
Ready to Begin? GET STARTED