If you are facing an impending divorce in Nebraska, you no doubt have many questions about how this major life event may impact you financially. For many people the emotional side of letting go of many special belongings is made worse when the reality of the financial losses starts to set in. However, it is important for you to learn about the ways in which you may be able to preserve some of your savings.
If you and your spouse are going to divide your 401K account, care should be taken in this process lest you be left paying unnecessary penalties and taxes as well as handing over some of your hard-earned savings. As explained by the United States Department of Labor, a qualified domestic relations order will allow you to name your to-be former spouse as an alternate payee on your 401K account. This means money can be paid directly to them leaving any tax responsibility to them and not to you.
The use of a QDRO also eliminates the assessment of any early withdrawal penalties on you as you are clearly not taking an early distribution that fails to meet retirement qualification, which is when these penalties are assessed. If your spouse chooses to reinvest the money into other retirement funds, they may also avoid the taxes at that time.
If you would like to learn more about how a qualified domestic relations order might help you, please feel free to visit the retirement and property division page of our Nebraska family law and divorce website.