If you are getting divorced in California, you may think that the state's community property laws might make divvying up your assets and debts easy. That may not necessarily be so. You and your spouse will still have to agree on many things throughout the process. Even once you have made an agreement on who will receive what, you may have to pay special attention to how you execute some elements of your agreement.
A good example of this is if you will be splitting the assets in a 401K account. Simply outlining the terms of the asset split in your divorce settlement is not enough. You may need to have a qualified domestic relations order if you want to avoid paying unnecessary early withdrawal penalties and taxes on the distributions taken from your 401K and given to your former spouse. The United States Department of Labor explains that a QDRO is the legal means by which you can onestablish another person as a payee your 401K account.
By having a QDRO in place, you may be able to have money paid directly to your partner. They will then assume the tax responsibility for any money received as well. Taxes may be avoided by them if they choose to reinvest the money into another retirement account.
This information is not intended to provide legal advice but is instead meant to give divorcing California spouses an idea of what a qualified domestic relations order is and when it may benefit them to have one.
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