Retirement accounts often rank among the most complex assets that have to be dealt with during property division proceedings. One reason may be because many in Columbus may question why these accounts are even considered to be marital property. On their own, they are not; it is the contributions made to them during a marriage that are. Contributions to a 401k or retirement pension plan are typically benefits one earns through their employer. Like the salary own receives, these benefits are intended to aid an employee and their family, thus the designation of employee benefits as marital assets.
Ye one typically cannot make an early withdrawal from a retirement account without incurring some type of tax penalty. In addition, retirement plan administrators are only allowed to make disbursements to plan participants. In order to avoid both of these potential obstacles during property division proceedings, information shared by CNBC says that the court must issue a qualified domestic relations order. With a QDRO, an alternate payee can receive funds from a retirement account. That alternate payee (the non-contributing spouse) may even be able to avoid early withdrawal penalties (provided that the reason for the withdrawal is specified in the QDRO). However, they will still have to pay income tax on whatever they receive.
If the aforementioned process of splitting up a retirement account seems overly complex, the 401k Help Center offers up a suggestion that may offer an easier solution. The plan holder can simply relinquish their claim to another retirement asset in exchange for retaining the full value of their retirement account. This allows them to keep their retirement income plans completely intact.