Most retirement assets are in the name of a single person.  Examples include true pensions, as well as IRAs, 401(k)s and similar tax sensitive saving mechanisms designed to fund a person’s retirement.  Other kinds of assets, such as stock options (whether vested or not) can have similar characteristics.

    In most circumstances, the money is either locked in, or can only be pulled out early with a big penalty.

    One of the only times in which a retirement asset can be divided, and all or part given to someone else, without such a penalty, is as part of a divorce.

    Whether there is a settlement, or whether there is a trial and a decision by a judge, most such retirement assets can be transferred to the other spouse, or divided, with part then being transferred to the other spouse, with no penalty and no tax consequences.  In many cases, a special judgment or court order called a Qualified Domestic Relations Order (QDRO) is needed to do this.

    Most divorce lawyers retain specialists to assist with or even take care of these special QDROs.

    It can be important, especially if some other lawyer will be drafting the QDRO, to ensure that the language in the Judgment of Dissolution of Marriage (formerly called the divorce decree) is properly worded, so that there is proper authority to draft the appropriate QDRO.

    For this reason, it can be important to provide your lawyer with full information about all retirement assets as soon as possible.  Details may include the actual plan document.  Details should, at a minimum, include the full account number(s), the full and correct name of each such retirement asset, and a recent benefit statement for each retirement asset.  This will allow your lawyer and the QDRO specialist to gather the information necessary to ensure that the proper wording is in any Judgment of Dissolution of Marriage, and to follow through with the timely preparation of any necessary QDROs.

    While it is possible to give Retirement Asset A to one spouse, and Retirement Asset B to the other spouse, often this is not perceived as fair by one spouse or the other.

    There is a cost to preparing QDROs.  However, because the assets are once again subject to significant penalties for withdrawal after the QDRO has split or assigned the assets, there can be an important fairness component to having divided each such asset equally.

    This will allow each person to manage their half of each asset just as if it were a retirement asset that they themselves had earned.

    It also allows each person to take half the apples and half the oranges, rather than fighting over whether an apple or an orange has higher value, or feeling that one has been disadvantaged if they take all the apples, and then apples decline in value, while oranges rise in value.