People in Texas may discover that there are expensive consequences for not using the proper procedures to divide their retirement funds. In addition to giving an ex-spouse more of the retirement funds than was originally intended, there may also be hefty taxes and withdrawal penalties that may have to be paid. It is important that divorcing individuals are aware that each of the different kinds of retirement accounts is governed by their own set of rules.
Workplace retirement plans, whether they are 401(k) plans or regular pension plans, have to be divided using a qualified domestic relations order. For individuals who may be entitled to a portion of their ex-spouse's workplace retirement funds, using a QDRO is the only way with which they will have legal access to their share.
While the contents of a QDRO are based on the divorce agreement, it is considered a separate legal document. The order should be thoroughly reviewed by an attorney before it is filed with the court to ensure that the contents reflect what is stipulated in the divorce decree. A separate QDRO will have to be completed for each retirement account that has to be divided.
The contents of the order should clearly specify if the 401(k) funds are to be moved to a rollover IRA, or if the recipient is to receive the funds outright. The movement of the funds will only take place after the order has been filed with the court, and the administrator of the 401(k) plan has approved it.
A family law attorney may work to obtain the desired property settlement terms for clients who are getting a divorce. A lawyer may litigate to protect the rights and interests of clients who want to resolve disputes regarding the division of retirement funds, real estate and other high-value assets.