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The Division of a 401(k) in a Divorce

On Behalf of | May 22, 2019 | Divorce

The division of a 401(k) in a divorce is a complex process.  Specific paperwork must be prepared and orders issued by the judge.  It is easy for those who represent themselves to miss this important aspect of a North County or Carlsbad divorce.

Retirement accounts such as a 401(k) are often one of the largest assets in a North County San Diego divorce. Is your personal 401(k) yours to keep, or is it like any other asset in your divorce – to be divided evenly by the community?

Most retirement plans such as military pensions and veteran’s educational benefits, IRA’s, 401(k)s, 403 plans, employee stock option plans, Keoughs, defined benefit plans and ERISA plans are considered to be “community property” in California, and as such are subject to a 50-50 division.

Other retirement vehicles and benefits such as Social Security, workers compensation disability and payments for military injuries are not handled as part of the community property process.

Community property is to be divided equally in California.  How is this accomplished with a 401(k)?  The division of a 401(k) is actually a separate legal process from the divorce, but this should be clearly addressed in the separation agreement and handled at the same time as the divorce itself.

The division of a 401(k) requires a “Qualified Domestic Relations Order” or QDRO (often pronounced like “cue-drow” or “quad-drow”).  The QDRO is a legal order telling the administrator of the 401(k) how to divide the retirement account.  This legal order should be accomplished and processed immediately following the divorce orders.

Many 401(k) plan administrators have their own standardized QDRO and will not accept any other order or format. The legal terms contained within the QDRO must be very specific. There are often tens or hundreds of thousands of dollars at stake, so this is one of the most important steps in any divorce.

Based upon our decades of experience and expertise in Carlsbad property division cases, we can tell you that these amounts can often be used to offset other assets such as business ownership interests, or the community interest in the family home.  While the 401(k) itself is calculated as part of the community the ultimate division of the actual account can be quite different.

Many self-represented Californians miss the QDRO as part of their divorce process. Some partners misunderstand (or misrepresent) the manner in which retirement assets should be handled. This is why it is so important to work with experienced and proven attorneys at Burke and Domercq.

We invite you to contact us or call 760-389-3927 to schedule an appointment with one of our seasoned attorneys.  Learn more about the division of a 401(k) in a divorce and get answers to all of your questions.