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Annoying fee when dividing retirement accounts after divorce

Texas couples who have retirement plans may need to think about what will happen to these savings funds if a divorce occurs. When dividing or splitting a 401(k) plan, a qualified domestic relations order is needed. A QDRO allows for the transfer of assets with defined-contribution accounts. Knowing about this order is important because a large fee is often attached to it.

The administrative costs alone for a QDRO could range from $300 to $1,200. The fees for this order may be an easy way for 401(k) plan sponsors to make more money, but some feel that the charges are reasonable for the work being provided. QDROs are complex and take time to complete, so they require a large processing fee. However, not all companies charge them.

Generally, QDROs come with fees when a third party acts as a record keeper or administrator for a 401(k) plan. Challenges arise when ensuring that the fee translates into quality. If any editing is needed, the cost jumps up towards the higher end of the fee scale. If there is an error, the process of dividing a plan is stalled. Additionally, this means there are additional costs while an attorney or consultant finds and fixes the issue.

There is no simple answer when it comes to the best way to split assets after a divorce. When possible, planning ahead could help a couple avoid trouble later. This might include prenuptial or postnuptial agreements, but a couple could also try mediation or negotiation when wanting to form a settlement arrangement for a high asset divorce. While many expenses come with a divorce, one may need an attorney's assistance to get a fair resolution in terms of alimony and property division. It is important to know about all assets and their values.

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