When a couple divorces, there are many complex issues to sort out, including the division of property, money and assets.
There are the obvious pieces of property to negotiate such as who might keep the house, the cars or the heirloom furniture, but couples may question how retirement accounts are handled.
Alaska is an equitable division state which means that property between a couple is divided in an equitable fashion, but this doesn't always mean equally. Anything acquired during the marriage is subject to a property division decision and is considered "marital property", including retirement accounts accumulated during the marriage. What many don't realize is that the retirement accounts are often the highest assets in a marriage.
Dividing retirement benefits
In a divorce, other people, including an ex-spouse or children, may be entitled to a portion of your retirement accounts. If retirement accounts from a private company or nonprofit (such as a 401k, 403b or 457b) are to be split between spouses, you'll need a form called a Qualified Domestic Relations Order, or QDRO. A QDRO is a specific form that designates an alternate payee for the disbursement of funds from the retirement accounts.
A QDRO is an order issued by a court to notify the plan administrator about the division of the benefits, specifically how they are to be divided between spouses or whether they might go to pay child or spousal support. To change the distribution of the benefits, a retirement plan will require a QDRO - a divorce decree won't be enough by itself. A Qualified Domestic Relations Order only becomes "qualified" once the plan accepts and approves it.
Work with a professional
It will be worth working with a qualified divorce attorney to avoid any costly missteps. Retirement is one of the few times you can dip into your retirement funds early, but a QDRO requires that certain steps be followed to be recognized as valid. Legal counsel will help you to avoid any penalty fees or income taxes associated with an early withdrawal.