Divorce for older couples, also known as gray divorce, is a unique situation different from divorce for younger couples. Typically child support or the custody of children do not factor into a gray divorce. What are typically considered in a divorce for older couples are their marital home, and their retirement accounts. These retirement accounts include any 401(k) accounts, pensions, or IRAs.
QDRO
QDRO’s are also known as Qualified Domestic Relations Orders. QDRO’s officially recognize a divorced spouse’s right to receive payment from the other spouse’s retirement account. QDRO’s are necessary to transfer payment rights in a 401k or a pension. However, QDRO’s do not cover IRA’s.
401(k) accounts
Accounts such as a 401(k) are usually among the simplest assets to divide. The full account value is already known. Under the QDRO, a divorcing couple could agree to split an account 50-50. Complications can arise if the receiving spouse decides to withdraw the money instead of putting it into an IRA. This may result in additional taxes and withdrawal fees.
Pensions
Pensions follow the rules created by the employer. Rules regarding the splitting of pension payments vary from employer to employer. Pensions are easier to split in QDRO’s between spouses when the pensioner has already started receiving payments, because the payment amount is already known. If the payments have not started, then it is necessary to base the payment split off of the present value of the future payments.
IRA’s
Since QDRO’s do not cover IRA’s, a divorcing couple must have the IRA’s terms settled in their divorce or legal separation agreement. A safe way to split an IRA is to directly transfer money from one IRA to another IRA in a trustee-to trustee transfer. This method avoids fees or taxes that could occur from withdrawals or splitting up normal payouts.
The process for a divorce among older couples has its challenges. With equitable distribution as the legal standard here in Oregon, not every asset may become a 50-50 split. The process, however, is navigable and made easier when an experienced attorney guides the way. An attorney can take someone seeking a divorce through the process one prudent step at a time.