by KYW's Salil Gutt
For many families retirement accounts are where the bulk of family wealth lies. So financial planning and attention to detail in the event of divorce becomes important. Here are the basics about splitting retirement accounts in the event of a divorce.
Monies in qualified retirement plans like 401k's, defined benefit pension plans or self-employed pension plans must be split according to a document called a Qualified Domestic Relations Order- QDRO. This spells out precisely who gets what percentage. A QDRO done wrong or recorded incorrectly by the plan custodian can shut out a former spouse completely.
IRA's are easier. This distribution is split according to the divorce or separation agreement. The best way to do this transfer is to do a direct rollover from one custodian account to the receiving spouse's IRA custodian. This will be a tax free transfer.
One important point. Any deviations in distributions from what is legally agreed to will result in income tax and a 10% penalty to the former spouse.
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