Like other assets, a 401(k) retirement plan will ordinarily be considered, at least to some extent, marital property that is subject to division in the event of a divorce or separation. This may be of particular interest to White Plains residents, since they and others within the State of New York may have a lot of wealth tied up in their 401(k) plans.

If a couple cannot agree on how to divvy up a 401(k), then, as is the case with other property, the court hearing a divorce case will order what it sees as a fair division. While it may be easier to divide property in such a way where a person keeps his or her 401(k) outright in exchange for giving up some other property, sometimes, spouses will agree to, or be ordered to, split the money in a 401(k) account.

Getting to this point, however, is only half the battle. The court’s orders, or even a couple’s agreement, is only binding on the couple. A 401(k) on the other hand, is not like a personal bank account that one can access as he or she pleases; a plan administrator holds these funds as a steward of them. Ordinarily, a person who has not reached retirement age may not withdraw these funds without a substantial tax penalty.

Because of this, it will be necessary for someone, usually an attorney in the case, to draft a qualified domestic relations order, or QDRO, for the judge to sign and then submit to the plan administrator.

Assuming the QDRO is drafted in such a way that the administrator can enforce it without running afoul of applicable federal laws, the QDRO will give the administrator the authority necessary to divide the 401(k), even though the spouses may now be divorced. If the QDRO is drafted correctly, the division should happen without a tax penalty.

As one can probably tell, correctly drafting a QDRO is an essential part of what a lawyer practicing family law and divorce does for his or her clients.