If a plan participant gets divorced, his or her ex-spouse may become entitled to a portion of the participant¡¯s retirement account balance. Depending on the type of plan and the amount of benefits, the ex-spouse may have immediate access to his or her portion of those assets or at some point in the future (usually upon the participant¡¯s retirement or death).
Most plans require an ex-spouse to file a Qualified Domestic Relations Order with the plan administrator before the plan can pay any portion of a participant¡¯s retirement plan benefits to that ex-spouse.
A court can award all or a portion of participant¡¯s retirement plan assets to his or her spouse, former spouse, child or other dependent by issuing a QDRO, which must be honored by the plan. The QDRO can order the plan to pay the participant¡¯s retirement plan benefits to an alternate payee. The court's order can be in the form of a state court judgment, decree or order, or court approval of a property settlement agreement.
A participant who gets divorced may also want to change the beneficiary of his or her retirement plan. To do this, the participant should:
-
contact his or her employer or plan administrator to request change of beneficiary forms;
-
complete those forms in accordance with their instructions; and
-
submit the completed and signed forms to the employer or plan administrator, along with a copy of the divorce decree, if requested.
Additional resources
Publication 504, Divorced or Separated Individuals
Publication 575, Pension and Annuity Income
Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)
Did you know that there are events in life that may have a significant tax impact?