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Splitting up retirement assets sometimes a tricky divorce issue

The dissolution of a marriage can take an emotional toll that is difficult to manage. However, several financial matters also have to be addressed during a Montana divorce. One of them is the distribution of retirement accounts.

If a qualified plan has to be divided between to the parties, a legal document is required. It is known as a qualified domestic relations order (QDRO). Qualified plans include defined benefit plans, pension plans and 401(k)s.

With a QDRO, there is an alternate payee and a participant: The participant is the individual whose interest will be transferred, while the alternate payee is the person receiving the interest. The alternate payee is typically a person's divorcing spouse, although it may also be a minor child. A QDRO is a transaction that is tax free as long as it is reported properly to IRA custodians and the courts. The spouse receiving the assets may choose to add them to his or her IRA or to a qualified plan that he or she has. If the transfer is not defined as a QDRO, it will be subject to penalties or taxes.

Dissolving a marriage in Montana is a multi-step process that can be complicated financially. This is especially true for those with high-value assets or with a large number of assets, and it is also particularly the case for individuals who are close to retirement age. However, the right legal guidance may help people going through divorce to avoid costly mistakes and ultimately achieve settlements that are personally beneficial.

Source: forbes.com, "Divorcing? How to Split Up Retirement Nest Eggs", Duncan Rolph, Nov. 23, 2016

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