Regardless of the length of the marriage, retirement benefits should be discussed and settled in every divorce case. For example, the petition, marital settlement agreement and judgment should all provide either for the spouse’s waiver of retirement benefits or the division of any such benefits. A spouse should waive retirement benefits only if that spouse’s share is worth very little.
There are two options for dividing retirement benefits: (1) the present-day valuation buy-out, and (2) division into two accounts. In the former, the spouse without the retirement benefits takes the present-day value of his or her interest in the retirement benefit and trades it for something else of equal value, such as cash or other assets. Stock options and pension plans where a person must work for a certain number of years may be worth more than you think. It may be advisable to hire a professional pension actuary or appraiser before making a decision.
When dividing a retirement account, you want to make sure you don’t lose any tax advantages. A Qualified Domestic Relations Order (QDRO) will be required to transfer a share of retirement funds from the spouse participating in the retirement plan to the other spouse.
Retirement assets are often the most valuable asset held by divorcing couples. For that reason, agreeing as to how these assets will be divided in an important step towards achieving a cheap divorce.