Your 403(b) plan becomes marital property during a divorce. These plans are similar to 401(k) plans, but are for employees of government, education and non-profit organizations. Both you and your spouse have rights when dividing the plan.
Splitting the account isn't as easy as dividing a house, which might be sold or transferred to the other party during a divorce agreement. The 403(b) plan needs the addition of a qualified domestic relations order or QDRO, which must be approved and signed by the divorce court judge and the plan administrator.
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The QDRO contains all the details about transferring all or some of the funds from the account. It must be submitted by the time the divorce settlement has been reached or either party could suffer tax consequences along with legal problems that could extend the divorce settlement.
To make sure the funds are divided according to the agreement in the divorce, discuss your rights and the 403(b) account with your divorce attorney, financial adviser and the plan administrator. When done correctly, the QDRO can make the splitting of a 403(b) plan a simple process,
according to Investopedia.
Professionals can help you divide your plan fairly in the divorce settlement. A certified divorce planner has training in evaluating the assets and decisions during a divorce,
advises Brenda Watson Newmann in an article for Expert Plan.
In many cases, the spouse has to bring attention to the 403(b) in divorce proceedings. Recognizing your spouse has rights to these assets will help reach an agreement more smoothly.
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Both parties might have a retirement account and decide to simply keep their own during a settlement. If one person has an account with more money, negotiations might allow one party to move a portion over to the other person's account.
A financial adviser or certified divorce planner can help you understand how much your 403(b) will be worth in the years ahead. During divorce settlements, retirement accounts become one of the couple's possessions.
Along with looking at the plan's current value, you should also consider its potential and how much the value plays a part in dividing possessions.
A properly worded QDRO allows you to transfer or rollover funds in your 403(b) account without tax penalties for early withdrawal. Agreements for the account can vary. You might transfer the money to the spouse or agree to leave money in the plan and allow the spouse to withdraw money at the time of retirement. Money withdrawn will be taxed in either case, but penalties will be avoided.
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