Last updated on April 8, 2021
When getting divorced, spouses in Georgia may need to split the assets in their retirement accounts as part of their property divisions settlement. However, it is important to understand that splitting these accounts may not be the same as splitting other assets as special rules may apply. SmartAsset indicates that without the use of a Qualified Domestic Relations Order, people may have to pay early withdrawal penalties and taxes on any money taken out of a 401(K) even if the distribution is outlined in a divorce decree.
The U.S. Department of Labor explains that that a QDRO establishes the non-account-owning spouse as an authorized alternate payee on the account. It allows that person to receive funds from the account and then roll them over into another qualifying retirement account sans those early withdrawal penalties or taxes.
People can also choose to defer taking money at the time of the divorce until the account owner reaches retirement age but will need to begin taking money either in increments or a lump sum by the age of 70 years and six months. Distributions taken before the age of 59 years and six months that are not put into other retirement accounts may be subject to 10 percent taxation.
Not all accounts require the use of a Qualified Domestic Relations Order. Some accounts will require the use of a document called a transfer incident to divorce. In addition, a QDRO can also be utilized to make payments to a former spouse to satisfy an order for alimony. A child may also be the alternate payee for the purposes of paying child support.
