Deciding to end a marriage in Ohio is seldom a decision that is made lightly. While there are many concerns that go into arriving at the decision, financial concerns may be chief among them. While it can be difficult, a divorce doesn’t have to spell doom for one’s financial future. How assets are distributed can help to determine one’s stability moving forward. Chief among these is how 401(k) accounts are divided.
Ohio is an equitable distribution state as opposed to a community property state. In a community property state assets acquired after marriage are considered owned equally by the parties and thus usually divided in that manner; in an equitable distribution state the division of assets is meant to be fair, though not necessarily equal. The variables in making that determination may include the length of the marriage, financial situation of each partner and the size of the 401(k) account. Once an amount is established, a Qualified Domestic Relations Order (QDRO) must be obtained and given to the plan administrator. This form, which can be complicated, allows the funds to be moved without incurring any tax liability or early withdrawal penalties.
With a QDRO in place, a rollover of funds can be made. A typical transfer would be from a 401(k) to an IRA account. This will not create any tax implications for either party as long as a QDRO has been submitted. If one party withdraws from the account before age 59 1/2, the amount withdrawn may be taxable and will also be subject to a 10 percent early withdrawal penalty.
A person in Ohio considering divorce should consult with an experienced family law attorney. A knowledgeable attorney can review one’s financial situation and make recommendations regarding distribution of assets. While the process can be complex and drawn out, a lawyer can help pave the way to an equitable settlement.