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Dividing a retirement plan is a complicated matter

On Behalf of | Apr 14, 2021 | Post-Divorce Issues |

In Maryland, retirement plans like pensions and 401(k)s are subject to a fair property division in the event of a divorce.

However, dividing this property can lead to legal issues and even disputes. One reason is that many Rockville residents have a lot of their wealth tied up in their retirement plans.

Adding to this, people frequently are counting on having their retirement plans fully available to them when they are ready to stop working.

There may be questions about whether to divide a retirement plan

While retirement plans can be considered marital property in Maryland, there may be some questions as to how much of the plan truly should be split between spouses who are divorcing.

An example would be if one spouse worked for a number of years prior to getting married. In that case, that person may argue that she should be able keep outright that portion of the retirement plan that she built up prior to the marriage.

Moreover, especially with respect to pensions, there can be some question as to how much the pension is worth, which in turn will decide how much each spouse will receive after a divorce. Usually, one or both spouses will need to consult with a financial expert.

Getting a retirement divided may require additional steps

Once the spouses can agree on how much each should receive, they still have to decide how to go about actually dividing the plan.

Sometimes, the spouse who has the plan will want to negotiate in order to be able to keep all of it, even if that means he will have to give up claims on other property or agree to take on additional debts or expenses.

In other cases, the spouses will need to execute a qualified domestic relations order, or QDRO, in order to divide the plan without negative tax consequences.