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Retirement benefits are among the most complicated assets to divide in divorce because the accounts may not be easily accessible and the value of the underlying assets aren’t always clear. A divorce attorney may call in an actuary or other financial expert to review the benefits and determine what assets are and are not eligible for division in the divorce.

There are a variety of different retirement benefits that are considered in a divorce. Among the easiest to split are individual retirement accounts and defined contribution plans. A 401k is a good example of a defined contribution plan. The account is usually invested in things like stocks, bonds, mutual funds and other investments in which the values update on a regular basis. That means it is very easy to determine the value of the account.

Generally, contributions made to an IRA or 401k during the marriage are considered marital property. Contributions made prior to the marriage or after a legal separation are generally excluded from the marital property and are not eligible to be split.

Social Security, pensions, and other defined benefit plans are more difficult to divide because the present value of the plans may not be readily apparent. These types of retirement benefits are distributed in the form of future lifetime payments after retirement. Since the plan provides a future benefit, there often isn’t a current account value that can be accessed.

Courts issue a document called a Qualified Domestic Relations Order (QDRO) to divide the retirement benefits. The spouse who is receiving a portion of the retirement benefit presents the QDRO to the administrator of the retirement plan. For defined contribution plans and IRAs, the QDRO usually initiates a lump sum distribution, which the receiving spouse can either cash or deposit into their own defined contribution plan.

For defined benefit plans, some may allow for lump sum distributions to satisfy a QDRO. However, others may not and may only allow the spouses to split the future benefit payments. In those cases, the court may consider splitting other assets in lieu of splitting pension payments in the future.

It’s important for a spouse who is receiving retirement benefits to present the QDRO to their spouse’s plan administrator as soon as possible and before the divorce is final, if possible. If the plan will only satisfy the QDRO with future pension payments, the spouse receiving benefits may wish to ask the court to replace the retirement benefit with a different asset that can be accessed immediately. If the divorce has already been finalized, the court is unlikely to reopen it and the spouse may be stuck with the future pension payments instead of an asset they can use immediately.