Who Gets What?
Kiplinger's (03/01) Vol. 55, No. 3 p.104; McGrath, Courtney

Retirement plans are becoming a key battleground in divorce settlements, says Martin Shenkman, a lawyer and co-author of "Divorce Rules for Men." For many couples, retirement accounts are the most valuable asset to be divided. However, divvying up these assets can be complicated. In addition, if you decide to split a 401(k), you will have to renegotiate a qualified domestic relations order (QDRO), which specifies the alternate payee and how large a share he or she will receive. QDROs can be costly and time consuming, but they are the only way to ensure that a plan administrator will follow your instructions. You could trigger major tax consequences if you do not use a QDRO. Splitting retirement plans also raises the issue of when you will get the money. If you take a lump sum, you can either roll the funds into an IRA, or keep the cash if you are willing to pay the taxes on it immediately. If you transfer part of a former spouse's IRA into an IRA of your own, you cannot tap the account penalty-free until you reach age 59.5.

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