Among the many things that divorcing spouses in Kentucky are commonly concerned about is the loss of precious assets. This is understandable because those assets deemed to be joint and part of the marital estate are frequently split in some fashion between both spouses when a marriage ends. One type of asset often included in the property division settlement is the 401K account.
The thought of losing a large share of one’s hard-earned retirement savings is not easy but there are some things that may be done in order to minimize the total amount of asset loss if a couple must split a 401K account. The United States Department of Labor explains that typically only the named owner of a 401K account may withdraw money from the account. In the case of a divorce, if the owner takes money out of a 401K and pays it to a spouse to satisfy a property division agreeent, the owner may be liable for penalties and taxes.
However, if a qualified domestic relations order is used, money can be paid directly to the spouse who does not own the account. This bypasses the owner and allows that person to avoid paying the taxes and penalties. For the spouse who receives money, if the money is put into another retirement account, they may also be able to avoid these costs.
If you would like to learn more about qualified domestic relations orders and related topics during a divorce, please feel free to visit the debt and asset division page of our Kentucky divorce and family law website.