During a divorce, there can be a lot on the line for both parties. If you’re getting divorced in Colorado, you may have a 401(k) that’s at risk of getting divided. Understandably, you could find yourself doing whatever it takes to protect this asset. With that in mind, here are a few important things to know about dividing a 401(k) during a divorce.
You’ll need the court’s permission
Before splitting up your 401(k), you’ll need to obtain permission from a judge. To do this, you’ll need to get a Qualified Domestic Relations Order (QDRO). After you and your ex-spouse read and sign off on this order, a judge can sign off on it.
Consider the various distribution options
If you’re receiving part of a 401(k) from your spouse, you’ll have a few options to consider. One option is to roll over these assets into a retirement plan. You can also wait to take your share until after the account’s owner retires. Lastly, there’s also the option to cash out the 401(k) balance you receive.
Division of a 401(k) varies by state
As you know, each state in the U.S. has its own laws. Therefore, laws about how to divide a 401(k) will vary by state. Colorado is considered to be an equitable distribution state, meaning the court will look at many factors to fairly divide a 401(k) in a divorce.
Think about creating an independent agreement
Lastly, you may also consider creating an agreement about how to divide a 401(k) with your ex-spouse. Unfortunately, coming to this type of agreement isn’t always possible, especially in a contested high-asset divorce.
In closing, splitting up a 401(k) is a major decision for people who are getting divorced. If you need help dividing your assets fairly, it could be beneficial to contact a divorce attorney. Hiring a lawyer may help ensure that you walk away with what’s important after getting divorced.