Georgia residents who are looking to save money on a divorce may be tempted to split retirement assets on their own. However, splitting such an asset without the proper authorization could result in taxes and penalties. In one case, an individual withdrew $250,000 from a 401(k) without getting a qualified domestic relations order (QDRO). That resulted in $85,000 in income taxes in addition to a $25,000 early withdrawal fee.
If that person had gotten a QDRO first, it may have avoided both the income tax bill and the early withdrawal penalty. For those who are looking to split pension proceeds in a divorce, it can often pay to work with an attorney who understands state law. For example, Massachusetts law forbids anyone from collecting on a former spouse's state pension after getting remarried. It may also be impossible to collect pension funds if a spouse dies before the QDRO is signed.
Therefore, it may be a good idea to hold off on making the divorce official unless such a document can be signed immediately. Those who do work with an attorney should look for someone who is certified in creating QDROs. To complete the QDRO process correctly, it may be best to ask a plan custodian for a model agreement, modify it to conform to state law and then submit it for approval.
While it may be possible to split most assets privately, it may be best to split retirement assets with the help of an attorney. Legal counsel can often help prepare a QDRO and submit it to the court. If an individual has any questions about how to properly divide retirement accounts or other assets, an attorney may be able to provide timely and proper answers.