When a couple in New York chooses to get a divorce, marital property must generally be divided. If the assets include 401(k) plans, proper steps must be taken to ensure that everything is divided properly. Failure to do so could result in penalties and taxes owed. A 401(k) or other qualified workplace retirement plan will be divided in accordance with a qualified domestic relations order (QDRO).
It may be necessary to hire an attorney who specializes in drafting such agreements. This advocate could be part of the legal team in addition to a divorce attorney. Whoever is handling this process will ideally be in touch with the 401(k) plan administrator to make sure that the QDRO is drafted properly. Separate orders will be required for each account that is subject to division.
Those who are receiving funds may opt for a trustee-to-trustee transfer. It’s also possible to receive funds directly, and those funds would then be subject to ordinary income taxes. The QDRO should spell out exactly where the money will go and when. It should also state whether the payout will be through a fixed dollar amount or a percentage of the account. Furthermore, beneficiary designations should not be changed until the divorce is final.
In addition to retirement accounts, other property such as a home, car or joint bank account may need to be divided. An attorney could help create a property division arrangement that’s based on the facts of a given case. If necessary, legal counsel could represent an individual either in mediation sessions or in court. In most cases, resolving property division matters outside of court will allow for a more timely settlement.