If you’re reading this, it’s likely because you or someone close to you is going through a divorce in New York and you’re wondering what will happen to your retirement savings. Maybe you’re feeling scared, unsure about what to do next, or overwhelmed by legal words and paperwork. You are not alone. Many people find themselves in the same situation. This time in your life is hard, and you deserve someone who understands the emotional and legal parts of what you’re going through. Our team understands that feeling of uncertainty, and we’re here to help you understand how your retirement accounts like pensions and 401(k)s are divided when a marriage ends.
Understanding Retirement Accounts in Divorce
During a marriage, both spouses may earn money and build up assets for the future. Retirement accounts are part of those assets. These can include pensions, 401(k) plans, and other retirement savings. In New York, when a couple divorces, the court sees these accounts as marital property if they were earned or added to during the marriage. That means both people may have a right to part of that money, even if only one person’s name is on the account.
If you or your spouse have a pension or 401(k), it is important to know that the court doesn’t just divide everything down the middle without a plan. The court must decide how to fairly divide these funds, and that’s where something called a QDRO becomes very important.
What is a QDRO and Why Does It Matter
A QDRO stands for Qualified Domestic Relations Order. It is a legal document that tells a retirement plan how to pay out a portion of one spouse’s retirement savings to the other spouse after divorce. This document is not part of the divorce decree itself. It is a separate order that must be written carefully and approved by both the court and the retirement plan provider.
Without a QDRO, you may not be able to claim your share of the retirement account, even if the divorce settlement says you are supposed to get it. That means you could lose money you were counting on for your future. This is why having a QDRO in place is so important.
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How Retirement Funds Are Split in New York
New York follows something called equitable distribution. That means the court doesn’t always split everything 50-50, but instead looks at what is fair. The court will consider many things, like how long you were married, how much each person contributed to the marriage, and your financial needs after divorce.
If you or your spouse earned money in a 401(k) or built up a pension while you were married, the part earned during the marriage is usually seen as marital property. The part earned before the marriage or after you separated may be treated differently.
Once the court decides how much of the retirement account one person should receive, the QDRO is used to actually make that happen. The QDRO will tell the retirement plan how much to give to each person, when to pay it, and how to keep it legal under tax laws.
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What Makes a QDRO Different from Other Divorce Orders
Many people think that their divorce agreement is enough to split retirement accounts, but it’s not. Retirement plans follow rules from federal law, and they need a QDRO to move money from one person’s retirement account to another person after a divorce.
A QDRO must follow both the rules of the court and the rules of the retirement plan. Every retirement plan is different, so the QDRO must be written just right. If it’s not, the plan might reject it, and that can delay things or even cause someone to lose money.
Also, a QDRO can help both people avoid paying extra taxes or penalties when the retirement money is divided. Without a QDRO, the person receiving the money might be hit with a large tax bill or be forced to pay early withdrawal fees.
Mistakes to Avoid When Dividing Retirement Accounts
One common mistake is forgetting to get a QDRO. Sometimes people agree in the divorce to split a pension or 401(k) but never follow through with the paperwork. Years later, when it’s time to retire, one spouse finds out they don’t have legal rights to the money they were promised.
Another mistake is using the wrong numbers or not understanding how the plan works. Some retirement plans have special rules about how and when they pay out benefits. If your QDRO doesn’t follow those rules, it might be denied.
Some people also think they can use a general form or copy someone else’s QDRO, but that can be risky. Every case is different, and using the wrong form can lead to serious problems.
Timing Is Everything With a QDRO
It is best to prepare the QDRO as soon as the court makes a decision about dividing the retirement account. Waiting too long can create delays or confusion. In some cases, if the person who owns the retirement account dies before the QDRO is completed, the other spouse may lose their right to the money.
Some plans also require the QDRO to be in place before retirement benefits begin. If benefits are already being paid out, it may be harder to divide them later. Acting early helps protect your rights and avoids these risks.
How the Court Looks at Pensions in Divorce
Pensions are different from 401(k)s because they don’t have a clear dollar value right now. They promise to pay a certain amount in the future. The court looks at how much of the pension was earned during the marriage and uses a formula to decide how much one spouse should receive. This is often called the Majauskas formula in New York.
The QDRO for a pension must clearly say how much of the pension will go to the other spouse. It must also explain how that amount will be paid and when. Some pensions have options for survivor benefits, and the QDRO should explain who gets those benefits if the person who owns the pension dies.
Working with a Lawyer to Get it Right
Getting a QDRO right means working with someone who knows how to read retirement plan documents, understand what the court expects, and put it all together in a way that protects your future. This process is detailed and must be handled with care. A missed step can lead to missed payments or problems when it’s time to retire.
You deserve peace of mind knowing that your rights to retirement savings are protected. Whether you are receiving part of a pension or 401(k), or you’re the one whose name is on the account, it’s important to handle this part of your divorce with attention and care.
Taking the Right Steps Toward Your Future
Now that you know what a QDRO is and why it matters, you can see how important it is to act early and correctly. Your financial future after divorce depends on this. If you’re worried about what might happen to your retirement savings, or if you just want to be sure everything is handled properly, you should speak with someone who has worked through this before.
At Mahserjian & Mahserjian-Ortiz, PLLC, we understand how difficult this time is for you. We take the time to explain your options, answer your questions in plain language, and make sure your rights are protected. If you’re going through a divorce in New York and you have questions about dividing pensions or 401(k)s, we can help. Contact us today to get the support you need for a better tomorrow.
