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The division of marital assets is one of the most complicated issues when dealing with a divorce process. Besides real estate, money, and other marital property, there are also retirement assets to consider. As the receiving spouse, it's normal to want to get everything finalized as soon as possible.
However, dividing retirement accounts can take much longer than most people think. While it is true that in an amicable separation, the funds can be available in as little as six months, it is not uncommon for the division of retirement benefits to take as long as two years or more.
An important factor when asking, "How long does it take to get 401K after divorce in NY?" is the choice of a divorce lawyer. Experienced attorneys know how the New York system works and can find solutions to help expedite the process.
One of the most popular law firms in Albany, New York, to help deal with this kind of situation is Divorce & Family Legal. We can advise on question like how long do you have to be married to get military benefits after divorce in NY? Top-rated attorneys are available for a free consultation today.
Is a Former Spouse Entitled to Their Partner's 401(K) After a Divorce?
Yes, in New York, a former spouse may take a portion of their partner's 401(K) or other types of retirement funds. One way to do this is through a court-issued qualified domestic relations order (more on that later).
It is also important to note that any funds contributed to the individual retirement accounts of the married couple are considered marital assets and are, therefore, subject to division during divorce proceedings.
However, one thing that can prevent one spouse from enjoying a share of their partner's retirement plans is a prenuptial agreement. If the agreement specifically bars access to pension benefits, a court order may not be enough to give the former spouse access to a 401(K).
Another issue that needs to be understood is that dividing the funds kept in retirement plans may result in both parties having to pay income taxes.
As such, speaking to a financial advisor, retirement plan administrator, or divorce attorney is the best option before proceeding.
What Is a Qualified Domestic Relations Order (QDRO)?
Unlike other marital assets that may be fairly simple to divide between the former partners, retirement plans require a bit more work.
Usually, the best way forward is to seek a qualified domestic relations order (QDRO). This is a court-issued order that outlines how a qualified retirement plan will be divided. It is a straightforward process in most cases, even though some complications and delays may happen at times.
Divorcing spouses usually need the help of an experienced attorney to draft the QDRO and provide legal advice regarding any other financial interests that may come up when the divorce decree is issued. They can also assist with how to split 401k in divorce in NY.
How Soon Can a QDRO Be Filed?
An experienced divorce lawyer will advise divorcing spouses to file a QDRO as soon as possible. While it is never too late to request access to a former partner's pension plan, waiting will only delay the process further.
A common misconception is that the receiving spouse has to wait until after the divorce has been finalized to file a QDRO. This is not true. The QDRO can be filed anytime, and the process tends to be a little faster if started before the divorce is final.
The QDRO Process
When initiating the QDRO process, it is important for the receiving spouse to get approval from their former partner first. Nothing should come as a surprise because this will only delay the process further.
In this regard, it is important to note that if the holder of the 401(K) is not willing to cooperate, the receiving spouse can go ahead without their approval.
The next step will be to send the completed QDRO form to the retirement plan administrator at the same financial institution holding the 401(K) account. They will likely adjust the wording and suggest specific language that needs to be used.
When the form has been amended, both parties can sign the order. If the account holder refuses to sign, a clerk court can do so instead.
The last step will be to file the QDRO with the divorce court that has jurisdiction and wait for the approval.
Getting Approval for a Qualified Domestic Relations Order
Several steps need to be completed before the QDRO is approved by the court. When both parties are willing to work together for the same outcome, the process will be faster.
Approvals for the QDRO will have to come from the divorcing spouses, the divorce attorney, the plan administrator, and the judge.
The final approval from the judge is the one that is likely to take the longest. In most cases, the area in which the couple resides will also influence how long it will take for the judge to provide approval.
Receiving Money From the Retirement Account
One piece of good news is that once approved, the lump sum can be transferred from the 401(K) plan into the receiving spouse's bank account within two to three weeks. From this point onwards, the spouse who requested the QDRO will become an alternate payee of the retirement plan.
QDRO Benefits and Income Taxes
The main benefit that the divorcing couple may be entitled to is that the IRS might decide to waive the 10% tax penalty that is usually charged when withdrawing funds before retirement age.
There are also some important tax implications to consider. If the alternate payee does not want to pay taxes, they can rollover the funds to another retirement account without incurring any penalties. However, if they choose to make a withdrawal, 20% of federal income taxes will be withheld.
Dealing With Retirement Plans After a Divorce? A Good Lawyer Can Help
When seeking a divorce, it is important to consider how marital property and other assets, such as retirement funds in defined contribution plans, will be divided. If the main plan participant is willing to make the other spouse an alternate payee, a simple QDRO will solve this issue.
However, marriage dissolutions are not always smooth sailing. Sometimes, one party will have to fight tooth and nail to get access to their former spouse's 401(K) account.
Divorce & Family Legal can help with that. Call right now and set up a free consultation.