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Are your retirement assets paying for child support or alimony?

It's easy to fall into a really expensive trap when it comes to putting together a QDRO (qualified domestic relations order) during the divorce process. It's complex enough to divide up assets, especially ones that your spouse may have hidden.

QDROs apply to retirement assets like 401(k) and IRA balances and are decrees that order retirement plans to pay child support, alimony, or marital property rights to your child, former spouse, or other dependent that you and spouse have been responsible for. 

Because complicated tax laws are concerned when it comes to potentially cashing out retirement assets before you reach the official retirement age for your plan, accountants who focus on the tax impacts of divorce are an important resource. There are massive penalties in the tax code for early distributions but QDROs are acceptable to waive the penalty for certain retirement assets.

However, you should not bypass an attorney when it comes to protecting your interests and avoiding incredibly costly mistakes in drafting a QDRO. Tax impacts aside, the money that gets distributed from retirement assets that is meant to be allocated to child support can either short change you in retirement and/or not provide enough for your child.

Each retirement plan also has different terms, and the party that ultimately determines whether a QDRO is qualified is actually not a judge but the plan administrator. Even family court judges aren't always familiar with the employee benefit laws that apply to QDROs.

An accountant may do a great job at helping you navigate the tax impacts of early distributions and other asset allocations post-divorce but an experienced domestic relations attorney who is well-versed in QDROs is the first person you should talk to. They know the complex laws that apply to QDROs and can analyze the terms that your retirement assets are bound to; and they will protect your interests, negotiate with plan administrators, and prevent violations of retirement plan terms.

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