It is commonly known that with divorce comes dividing up your assets, your debts and most often your home.   Sometime what is forgotten is the retirement savings because they are generally set up in one of the spouse names and there may be a presumption that it belongs entirely to that spouse. However, that asset is also subject to division with divorce in Arizona.

woman calculating retirement savings - divorce McMurdie Law and MediationWhat makes a retirement account a marital asset?

Arizona follows community property rules, which means that property acquired during the marriage is considered to belong to both spouses. Retirement accounts are classified as marital assets when the account was begun after marriage or funds were added during the marriage. A pension, IRA, 401(k), or other such accounts may be divided by whatever percentage was funded during the marriage. If your earnings went into a retirement account during marriage, a portion or all of it belongs to the marital estate and therefore will be divided or offset with another asset if the parties can agree on that division.

Are all retirement savings eligible for distribution?

No, not all retirement funds and savings will be included. If an account was established and funded prior to the marriage, and no funds were added during the marriage, then that account will usually be characterized as sole and separate party to the spouse who started that account.

How are retirement funds divided and distributed?

Separating funds from a retirement account is not as easy as other types of financial accounts. Because of this, a special procedure is sometimes necessary to divide these assets among divorcing spouses. A Qualified Domestic Relations Order (QDRO) is a court order used specifically for certain types of financial funds and allows some of the difficulties associated with early withdrawal of retirement savings to be avoided.

These orders are beneficial because they ensure that each spouse’s portion of the savings is paid directly to them, avoiding any potential issues that would violate the divorce decree. The QDRO also splits the burden of paying any necessary taxes on the savings between both spouses.

couple discussing retirement savings - divorce McMurdie Law and MediationWhat is the process for obtaining a QDRO?

If you are seeking the order to have your spouse’s retirement account divided, you must obtain prior approval of the QDRO by submitting a draft of the document to the retirement plan administrator. Requirements can vary between plans and providers, but many QDROs contain the following:

  • Name of the retirement plan;
  • Names and addresses of both the plan enrollee and their spouse;
  • Amount of savings to be distributed to the spouse; and
  • Breakdown of how the spouse’s amount was determined.

Once the plan administrator approves the QDRO, it can be submitted to the court for a final ruling. However, there is no guarantee that the QDRO will be approved, which can lead to time-consuming edits and repeated submissions. This is why working with a lawyer is hugely beneficial. An experienced family law attorney can help make sure the process is as seamless as possible. We will resource you in locating the best QDRO attorney to prepare this important document for you if it is needed in your divorce.

At McMurdie Law & Mediation, our primary focus is helping to develop resolutions that are beneficial to all parties. If you are in need of a Tempe divorce attorney, call McMurdie Law & Mediation at 480-777-5500 today to schedule a consultation.