A persistent misperception is that the division of assets and distributions of debts in a community property state like California is easier. The thinking is that all a court must do is split everything in half. In fact, the matter of dividing property and debts can be challenging in California, particularly in the in a high-asset divorce. Such a divorce may necessitate the use of what is known as qualified domestic relations order or QDRO in addition to the divorce decree itself.
Retirement-related assets in a high-asset divorce
One type of property than can make a high-asset divorce complicated is that associated retirement. IRAs, 401(k)s and other types of pension or retirement accounts bring with them what prove to be significant tax and penalty consequences if they are “cashed out” prematurely. Consequently, cashing out and divvying up money in retirement accounts generally is not the most attractive course to take in a divorce.
Operation of a qualified domestic relations order
A QDRO recognizes the right of a person in his or her spouse’s qualified retirement plan. Examples of qualified retirement plans include IRAs and 401(k)s.
A QDRO preserves the tax benefits associated with different types of retirement plans. In other words, a retirement account need not be prematurely accessed in order to apportion its value during divorce proceedings. For example, pursuant to a QDRO, both spouses can receive a court-determined share of retirement benefits as they become available according to the terms of a particular plan and applicable statutes and regulations.
Due to the complicated nature of a QDRO, and because of the other challenges associated with a high-asset divorce, legal counsel is advised in this type of marriage dissolution setting. Experienced representation works to ensure a lawful division of marital property and an optimization of available assets.