In many New York divorces, retirement accounts are divided. In other words, one spouse will receive a portion of the other spouse’s retirement account or plan. This sounds simple, but many times it is not. Some retirement accounts, such as 401ks, will not let you simply transfer money to your spouse. The division of the account will require a Court order. The court order is known as a Qualified Domestic Relations Order, or QDRO for short.
Because of potential tax and other issues regarding complicated Federal laws, it is not advisable that you do this yourself. You will need to hire an attorney to do this. So, when considering a proposal to resolve your divorce, be sure to ask your attorney exactly how long it will take and what it will cost for you to receive money from your spouse’s retirement account. In other words, ask if a QDRO will be necessary and what it will cost. In some cases, it does not make sense, from a dollars and sense perspective, to divide a retirement account. For example, if your spouse has a 401k with a balance of $3,000. Under the law, you may well be entitled to half of that account, or $1,500. However, if the division requires a Court order, which will cost you $2,0oo, obviously it makes no sense for you to sign an agreement which will give you half of that 401k. You will wind up losing $500. Now, if the QDRO will cost $500, the deal would make sense because you would profit by $1,000. So, again, it is important that you ask your lawyer if a QDRO will be necessary to divide the retirement and how much that QDRO will cost you.