Does a 401k get disbursed when divorcing?


Does a 401k get disbursed when divorcing?


When it comes to a 401k, disbursement when divorcing may occur. The goal of a 401k is to create a retirement plan for you when you retire. However, in order to contribute to your retirement plan, you and your spouse had to work together to pay other bills and to manage your home. In other words, even if your retirement plan is under your name, it may be co-owned by you and your spouse. However, this does differ from one situation to another.

What Happens In Divorce

If you are divorced, your assets, including your 401k could be split with your spouse depending on the ruling of the judge, unless you and your spouse can come to an agreement. In the case of a 401k if an agreement cannot be obtained, the judge will issue a qualified domestic relations order, or QDRO. This will define what happens with the divorce including what the division of it will be.

There are several things you should know about your 401k and divorcing.

  • If you divorce and your 401k is divided, your spouse may be issued a disbursement check for his or her share.
  • There is no 10 percent penalty on this disbursement, unlike a standard disbursement from the account.
  • It may be necessary for the funds to be taxed, depending on if they will be rolled over into another retirement account or if they have already been taxed.

As you consider filing for divorce, it is often best to work with an attorney to help you to split these types of accounts. Discuss your options for avoiding costly mistakes.

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