401(k) and QDRO


#1

My wife and I are separating cooperatively, and are in the process of dividing assets. I have requested half of her 401(k) and she has agreed. The money in this account is practically the only savings we have, and as it is a retirement account, they are fairly illiquid.

In order to move out of the marital residence I require access to those funds. I understand that a QDRO is necessary to divide the funds with the fewest tax implications. My question is twofold. First, what is the timeline for filing a QDRO; and second, how soon may we divide the 401(k) funds and divest ourselves of one another?

One final question: how are the funds to the payee spouse distributed? I do not have a 401(k) myself, and as stated above, our liquid assets are not sufficient enough for me to establish myself.


#2

It is best to have the QDRO completed as soon as practically possible. If you are unable to have it done prior to obtaining your judgment for absolute divorce, you’ll need to make sure that you include language in your divorce judgment that preserves your ED claim for purposes of entering the QDRO.

You don’t have to invest the funds in another 401(k) but you do need to invest them in an IRA or other retirement plan in order to avoid a tax penalty.