Couples who have been married for a long time have probably been saving assets with retirement in mind. Accessing those assets is is often relatively simple as long as the couple stays together. However, if they decide to divorce, what will happen to their assets and how will the divorce affect their retirement?
One way to protect retirement savings in divorce is through a Qualified Domestic Relations Order. To explain how it works, first note that a retirement account owned by either spouse during the marriage will most likely be considered part of the marital property if they later divorce. As with the rest of the marital property, it must be divided between the parties according to Michigan law.
The problem is that, if the owner is not yet retirement age, one cannot simply withdraw a retirement account without incurring stiff penalties from the financial institution, and facing a huge tax bill. These costs could easily destroy most of the value of the account.
A QDRO provides a way around this problem. Essentially, a QDRO is a court order that divides a retirement account between two ex-spouses, so that each can draw on the account when it matures.
After the divorce
A QDRO is a powerful tool for saving assets for retirement after divorce, but it may not be enough by itself. Newly divorced people may need to rethink their finances and investment strategies once they are single again.
This is where a knowledgeable divorce lawyer may prove to be invaluable. The divorce lawyer can guide you through the process and can offer advice based on your specific situation. An experienced attorney can also help you review the strategies that can help you in your newly independent life.