On behalf of North Tampa Legal Group posted in property division on Sunday, April 9, 2017.
Florida residents who get divorced know that their retirement accounts may well be considered part of their marital estate. This means that some amount of this prized form of long-term savings may need to be split with a spouse as part of a property division settlement. In addition to being concerned about losing some retirement money to a spouse, people may also be concerned about the potential for paying high taxes or penalties on money paid to a spouse from a retirement account.
The U.S. Department of Labor explains that a qualified domestic relations order is a court document that may be used to set up a person other than the account owner as legally able to receive distributions from the account. This is called an alternate payee. This person may be the spouse for the purposes of settling a property division agreement. With a QDRO in place, the account owner may be safe from any tax or penalty liability on money distributed to the alternatee payee spouse.
The alternate payee spouse may choose to invest the money received into another type of retirement fund. In this situation, that person may also be able to bypass early withdrawal penalties and taxes at the time the money is received.
The Internal Revenue Service adds that a QDRO may be used to allow a plan owner to use retirement funds to make spousal or child support payments. Tax and penalty responsibility is the same for spousal support as with property division settlements. When, however, funds are paid to a dependent for child support, the account owner retains tax responsibilities.