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Retirement accounts in a Massachusetts divorce

Massachusetts couples embarking on the divorce process know various important issues lie ahead. Property division tends to rank high on the list of priorities, especially for those who own valuable and complex assets.

When compiling the inventory of assets for division, the couple should also list any retirement accounts and pensions. These assets are often subject to special rules and a specific division method.

Identifying which parts of the plan are subject to division

Generally, the basic approach to dividing a pension or retirement account is based on how much of it accrued during the marriage. For example, one spouse works, accruing the account, for a total of 45 years, out of which he or she is married for 15. The portion of the account attributable to those 15 married years is likely a marital asset, and half of it may belong to the other spouse.

Using a QDRO

In order for an ex-spouse to receive a portion of retirement or pension payments, there must be a qualified domestic relations order. Typically, the attorneys draft the QDRO and submit it to the court for approval before giving it to the administrator of the retirement plan. Without a QDRO, the administrator may not make payments to the ex-spouse.

Deciding not to divide the plan

In some cases, a couple may decide that splitting part of the retirement plan does not make sense for them. The process may be complicated and not worth it financially. The spouse who receives the pension may also prioritize receiving full payments and therefore agree to let the other spouse have an asset of equivalent value instead, as a buy-out of his or her share in the part of the pension constituting a marital asset.

When this happens, a specialist needs to valuate the retirement plan. Keeping in mind that the spouse who the plan belongs to may not begin receiving payments until many years in the future, the valuation also needs to account for present value in order to ensure a fair division. Some types of accounts may entail taxes or other penalties upon withdrawal, so these considerations may also affect current value.

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