Addressing retirement funds in property division can be easy

Married couples tend to share more than a bank account and a home; they also often share plans for the future. Before a divorce, a retirement account that only one party paid toward is typically intended for use by both people. So what happens to this account when a couple files for divorce? Planning for financial security in retirement can require years of savings, and losing part or all of a planned retirement can be devastating. Luckily, property division typically requires Colorado couples to address how a retirement account will be handled.

A common retirement account that most people are familiar with is a 401(k), but IRAs and pensions are also popular for planning for retirement. When dealing with any combination of these accounts, a Qualified Domestic Relations Order -- QDRO -- is effective at establishing who is entitled to what from a retirement account. This usually addresses the percentage for which an ex-spouse will qualify. Unlike dividing other marital assets, like a couch or the nice dinnerware, a QDRO also determines what will happen to the retirement account if either party dies. 

However, a QDRO and a divorce does not automatically remove any future retirement savings from going to an ex-spouse. If he or she is still listed as a beneficiary on the account, that may create an entitlement to more of those funds than was initially agreed upon. It is a good idea to update any beneficiaries to a retirement account at the same time that the parties also address other joint accounts, such as bank accounts or credit cards.

While divorce typically means adjusting immediate plans for the future, ending a marriage does not have to completely eviscerate all plans and savings that either party made for retirement. Even without a spouse named as a beneficiary on an account, retirement funds are usually considered to be marital property. Although property division can seem overwhelming at times, with the proper counsel and information, Colorado couples can address how assets like retirement accounts, investments and multiple properties should be divided with as little trouble as possible.

Source:, "Division of Retirement Assets in a Divorce", Steven W., April 20, 2015

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