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Dividing retirement accounts and the QDRO

Since Texas is a community property state, a retirement account might be divided 50/50 during a divorce. However, a qualified domestic relations order may be a necessary document for this division. While a QDRO and the division of retirement accounts can be complex and costly, a QDRO may also help facilitate the speedy transfer of funds. People might want to work with a certified divorce financial analyst in order to make sure that they understand the terms of the QDRO and that they can use the division of funds to their best advantage.

For example, a couple may decide that one will get the home, which is paid off and worth $200,000, and the other will get the 401(k) that is worth $225,000. While it may initially look like the person with the retirement account has the better deal, recipients may be unable to access the account without paying a penalty until they are at least 59 1/2 years old.

In another case, people might have to pay half of their retirement account to their former spouse. They might be advised by their financial analyst to take $100,000 of the $1.1 million they receive and use it for fees while the rest could be placed in a tax-free account.

In a high-asset divorce, a retirement account is probably not the only type of property that needs to be divided. Couples may own investments, real estate, collections and even one or more businesses. Property division can either proceed through the couple negotiating with the help of their respective family law attorneys or by a judge during litigation. The advantage of negotiations is that couples will have more say about the result.

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