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What Will Happen to My Retirement Benefits During a Divorce?

In a divorce, retirement benefits are generally considered marital property, which means they are subject to the property division process. These benefits include IRAs, 401(k) and 403(k) plans, ERISA funds, employee stock option plans, defined benefit plans, and defined contribution plans.

Regardless of the type, it is important to account for all retirement benefits in the divorce settlement.

Division or buy out?

When the retirement benefits get classified as marital property, there are two ways they can be handled in the divorce judgment: through a division or through a buyout based on a valuation of the benefits.

In a buyout, the spouse that does not have the retirement benefits takes the present-day value of his or her interest in that retirement benefit and trades something else of equal value for it, whether it’s another asset or cash.

The division works as any other type of property division does during the divorce. If the couple cannot agree to a split themselves, the judge will develop an “equitable” arrangement after taking a variety of factors into consideration. In such a scenario, you will be required to use a Qualified Domestic Relations Order (QDRO), a vehicle through which the spouse who owns the retirement plan transfers a share of those retirement funds to the other through the plan administrator of the plan.

For more information on how your retirement benefits will get handled during your divorce, work with an experienced Minnesota attorney at Appelhof, Pfeifer & Hart, P.A.

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