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Retirement account division in high asset divorces

In a Michigan divorce, marital property is divided equitably between the two spouses based on a number of factors. These include the ability of the spouses to support themselves and the standard of living they are used to. All the assets that are acquired during the marriage are subject to division, and that includes money that is placed in retirement accounts.

According to the Huffington Post, the Employee Retirement Income Security Act of 1974 provides federal guidelines regarding retirement plans such as a 401(k), a pension plan and others. State regulations typically provide guidelines for the division of other accounts, including individual retirement accounts.

A Qualified Domestic Relations Order, or QDRO, is a court order that designates a person besides the original owner to have the rights to some or all of the benefits of a retirement plan. The official court document is necessary because of the tax benefits and legal issues involved with these types of plans. This should be drafted and taken before a judge prior to the signing of the divorce papers in order to prevent legal complications that could stop the dividing of the account.

There are significant taxes and penalties that come from withdrawing money from a plan before it is mature. Fox Business News reports that these may apply if the assets in the retirement account are divided without a QDRO, diminishing the total amount that is available to both parties. Another issue with dividing assets in a retirement account is the variable nature of the market. By using percentages rather than dollar amounts within the language of the QDRO, the people dividing the account will receive an equitable division. 

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Lorrie J. Zahodnic

"I will hold you up until you can stand on your own two feet."

Lorrie J. Zahodnic, P.C. has provided skilled and compassionate legal guidance to Michiganders in family law matters for over 20 years.

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