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What Happens to My Pension, IRA, and 401(k) in an Indiana Divorce?

By James Emerson on December 20, 2021

Indiana is one the few states that presumes all assets and liabilities, whether owned by one or both spouses, will be divided equally in a divorce. In many other states, only property acquired during the marriage is subject to distribution. In most cases, property and debts acquired and owned separately before the marriage are distributed equally in an Indiana divorce. This rule applies to pensions, IRAs, and 401(k)s, as well as to other types of assets.

How Do You Access a Spouse’s Workplace Retirement Plan?

If the court orders or the parties agree to a 50/50 split of a spouse’s retirement account, a Qualified Domestic Relations Order (QDRO) must be executed in most cases. This order allows for assets in a retirement account to be transferred to the non-account-owner spouse without adverse tax consequences. A QDRO is a way to access your spouse’s workplace retirement plan if you are entitled to a portion of it by order of the court.

What Is a Qualified Domestic Relations Order (QDRO)?

A Qualified Domestic Relations Order establishes an alternate payee’s right to receive all or a portion of the benefits payable with respect to a particular retirement plan participant. It is a judgment, decree, or order made pursuant to state domestic relations and community property laws, relating to marital property rights for the benefit of a spouse or former spouse. When distribution of assets in a divorce involves division of a retirement plan, a QDRO is executed separately, based on the final divorce decree. It is issued by the court and given to the employer, enabling the former spouse to roll over a portion of the funds into an 401(K) or another retirement account.

When Should Retirement Assets Be Split Down the Middle?

Dividing retirement assets equally may be the best option for some divorcing couples. This may be the case with the dissolution of a long-term marriage in which one spouse was the breadwinner and the other was the homemaker. A spouse who never worked and has no retirement savings may be entitled to half of the other spouse’s retirement funds.

What Are the Alternatives to Splitting Pensions, IRAs, and 401(k)s Down the Middle?

Splitting a 401(k), IRA, or pension down the middle can be a complicated process. Divorcing couples in some situations may consider alternative solutions, for example:

• If both spouses work and have retirement accounts of comparable value, they may agree to each retain his or her own individual retirement savings, instead of splitting both accounts down the middle.
• If one spouse has a high-value retirement account and the couple owns an asset of comparable value, for example a home, the other spouse may agree to accept the other asset in lieu of half the value of the retirement account.

How Can Indianapolis Divorce Attorneys Help?

Property division is one of the most complicated aspects of divorce, particularly when high-value retirement accounts are involved. Dividing this type of asset presents challenges in terms of valuation, the timing of distributions, tax consequences, and other issues. With more than 35 years of combined experience, our Indianapolis divorce lawyers have the knowledge and skills to strategically address these issues in your divorce.

Emerson Divorce and Accident Injury Attorneys, LLC is a high end, family law, boutique firm. We are straight shooters who do not hold back but will fight hard to get the best outcome for you. We have extensive experience representing clients in divorce involving division of retirement benefits. Call us at (317) 969-8000 to schedule a free consultation if you are facing divorce with division of assets that include a pension, IRA, or 401(k).