Not everything is on the table when it comes to asset distribution when a couple separates. Some Connecticut couples heading toward divorce may not be aware that a partner's retirement or 401(k) plan could be a divisible asset if it meets certain criteria regarding the laws that govern retirement plans. In most instances, federal law provides that these types of plans can't be switched over to someone else; however, there is a provision that allows a family court to order a retirement plan be shared with a spouse.
If that should be the case, a Qualified Domestic Relations Order (QDRO) needs to get a court stamp of approval. This order will allow 401(k) non-taxable assets to be transferred from one party to another by way of an Individual Retirement Account (IRA). A QDRO could also be used to transfer retirement fund assets to a child as part of a child support agreement.
So, 401(k) plans should always be considered when dividing assets in a divorce settlement. If there is some question as to the value of these plans, a concerned spouse may choose to enlist the aid of a lawyer or an actuary. They would be familiar with the Employment Retirement Income Security Act of 1974 (ERISA).
Divorce issues aren't always black and white, so when a Connecticut attorney presents a client with a divorce settlement, the client should ensure any retirement plans figure in the deal if allowed by law. A lawyer can explain these issues to a client in a concise, easily understood way. Asking questions about these types of sometimes overlooked issues is never a bad idea.
Source: ctpost.com, "Don't overlook a 401(k) in a divorce", Julie Jason, Accessed on Jan. 28, 2018