California is one of a handful of states that adheres to the community property rules regarding the division of property in a divorce. This generally means that a divorcing couple would divide any lingering property and debt in half among themselves.
Any instance in which a spouse has significant retirement savings may warrant a qualified domestic relations order (QDRO).
What is a QDRO?
QDROs are a type of court order that allows for the division of retirement plan benefits when a couple gets divorced. You must draft a QDRO in addition to a standard divorce settlement agreement to ensure you can gain access to your share of the retirement account (since it is not in your name).
You may find it challenging, if not impossible, to gain access to the funds in that account unless you take time to draft a QDRO and have the judge sign off on it when entering their final judgment granting your divorce.
It’s ultimately the responsibility of the divorcing spouses to submit the QDRO to the retirement plan’s administrator to ensure that they divvy up the funds contained in the account as per the court’s order. Generally, divorcing spouses can avoid having to pay the typical fees or penalties associated with early withdrawal. There are specific steps they must follow to do this if the withdrawal occurs before the account holder reaches retirement age, though.
You’ll want to apprise yourself of the steps you need to take with the retirement account and when managing any other valuable assets into consideration to ensure that you remain in a good financial position in the future.