If you have an impending divorce, you are likely concerned with how your finances will be able to fare the asset division process. You have worked hard since the beginning of your career to build up the retirement accounts that will see you through your old age, and it can be upsetting to think of losing a large chunk of those accounts and having to rebuild them now. It can help your planning to know exactly what to expect from the divorce process when it comes to your retirement accounts.
Marital property
In Colorado, anything that you obtained during the course of your marriage counts as marital property – with a few specific exceptions. This means that the portion of your 401(k) or other retirement account that accrued during your marriage is subject to division, while any part of it that you already had before getting married will remain your separate property.
If you are unable to negotiate your own agreement with your spouse, and it is up to the court to divide your property, Colorado law requires that the court divide your marital property equitably. This means that the division will be fair in light of both of your circumstances. If one of you has a lower earning capacity or greater needs, then that person could receive a larger portion of the marital assets.
QDROs
The manner in which retirement accounts are divided varies depending on the type of account and the needs of the individual spouses. Often, one spouse will demand that their portion of the account be immediately withdrawn or transferred into a different account in their name.
In this case, your spouse may ask the court for a qualified domestic relation order (QDRO). This is essentially a court order that enables your spouse to enforce their right to a portion of your retirement benefits. Depending on the circumstances, your spouse could use the QDRO to immediately withdraw the funds, or to reserve their right to receive a portion of the funds once they are paid out at retirement.
There are many contentious aspects of divorce negotiations, such as child custody and spousal support. While the division of retirement accounts won’t have an effect on you immediately, it is still worthwhile to take them into account while negotiating your divorce agreement, so that you can retain as much as possible of the accounts that you have painstakingly built up over the years in anticipation of your retirement.
