As you age, you not only accumulate wisdom in your years but also substantial assets to your name. It then only makes sense that one of the most contentious issues in a gray divorce for couples aged 50 or older would be about marital assets, particularly, retirement assets.
Senior couples may have a unique predicament as they face divorce after having long retired, which limits their employment options or other means of stabilizing their economic future. Their circumstances only become more pressing, given how financially draining the divorce process can be.
A Qualified Domestic Relations Order (QDRO), meeting Employment Retirement Income Security Act and Internal Revenue Service requirements, is a court decree that provides a legal way to divide and protect retirement assets. If you have a retirement plan sponsored by your company, you’ll be the “participant” spouse. You can designate your spouse as the “alternate payee,” so they could have rights to your retirement benefits.
Knowing how a QDRO can protect your retirement assets allows you to structure your finances in a way that will give you peace of mind regarding your personal and spousal obligations after you’ve settled your divorce.
Advantages of securing a QDRO
Approximately 15,000 Tennessee couples in their golden years still chose to tie the knot in 2020. But not all marriages survive until the end of their days. In fact, there have been a recorded total of 22,359 Tennessee divorces during the same year. Suppose you’re already in the middle of one. In that case, it will help to have your divorce legal counsel draft a QDRO, so that a retirement plan administrator executes it per instructions with the following beneficial effects. A QDRO:
- Ensures a smooth transfer of assets with both parties’ knowledge without incurring the standard 10% penalty for early withdrawal
- Prevents tax liability on the transfer as long as your spouse deposits the funds in a separate retirement account
- Restricts you from withdrawing from your retirement accounts and instructs your employer not to directly route benefits to you, as part of your and your spouse’s shared protection and transparency
Knowing these benefits comes hand in hand with working with your legal counsel to avoid violations and corresponding adverse tax implications.
A fair share for your future
No divorce comes easy, but ensuring you gain more than you lose for the remainder of your senior life is one of the primary challenges of a gray divorce. Mutually agreeing on the terms of your QDRO with legal supervision can ease your and your spouse’s current financial worries. But even more importantly, it also safeguards your financial endurance after the divorce becomes final.
