Your divorce settlement will specify the distribution of your marital property, including real estate, vehicles and retirement accounts. No matter who owns the retirement account, it may be considered marital property. Any amount deposited into the 401(k) or other similar retirement accounts during the period of time you were married is fair game for distribution to your spouse in divorce. Money placed into the account prior to your marriage may not be included in the divorce, with few exceptions. IRA's have different rules when it comes time to split the account. Read on for facts you need to know about the distribution of your retirement account when it comes time to create the settlement agreement.

Qualified Domestic Relations Orders (QDRO) are legal documents that allow you to remove funds from certain types of retirement accounts without penalty. The QDRO is a document that is included in the settlement, but must be a separate document from the settlement. Simply mentioning the retirement account or specifying the distribution of the account in the settlement is not sufficient.

The QDRO must be filed with the retirement fund's administrator before the divorce is final. Many retirement funds have complicated rules about how much may be paid out and when. The details under which the plan distributes the funds can be a major issue in the property settlement agreement, since many times bargains and trade-off have been made in anticipation of the funds. For example, one spouse may agree to accept a lump sum amount from the retirement plan in lieu of the family home. If the retirement fund disallows a lump sum payout and instead makes monthly payments to the spouse, the entire settlement agreement must be redone, which is not possible once the divorce is final.

The main benefit of the QDRO is the waiving of the penalty for early withdrawal for the alternate payee, which is the person specified to receive the funds, and the participant, which is the owner of the fund. While no penalties are charged, taxes must still be paid and the tax burden falls upon the alternate payee. Funds may be rolled over into another retirement account owned by the alternate payee to avoid, or at least delay, paying taxes immediately.

QDRO's, as you can see, can be confusing and their rules are complicated. Your divorce attorney (like those at the Law Office Of Ernest A Buche Jr) should be well-qualified to assist through this, and many other issues, that may arise from your divorce.