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Divorce and retirement funds are a complex mix

Retirement savings can be one of the most challenging issues for divorcing couples in Kentucky to deal with as part of their divorce negotiations and settlement. Because people have worked long and hard to establish those accounts and build them up, dividing them can be devastating, especially when each partner is financially reliant on those funds for future stability. In a 2016 survey, 62 percent of divorce attorneys said that retirement funds were the most contentious issue addressed by their clients during their divorce.

However, the difficulty of handling retirement accounts during divorce is not limited to the complexity of determining a fair, just distribution of what is often the largest asset accumulated by a couple throughout the marriage. Because these types of funds are generally regulated by a substantial number of financial guidelines, following the rules is critical to avoid costly penalties and taxes that can carry a significant financial impact for both parties.

Most retirement accounts are based at the workplace of one or the other spouse. In order to divide those accounts after a divorce, a court order known as a QDRO or qualified domestic relations order must be provided. The QDRO reflects the distribution agreed upon in the divorce, but is not issued automatically and must be requested from the court. The order should also specify the type of distribution to be made, including whether the funds are being distributed as cash or rolled over into another retirement account.

For people dealing with significant retirement funds or other assets during a divorce, handling the financial aspects of the end of a marriage can be the most complex and troubling part of the process. A family law attorney may be able to provide reliable advocacy and representation throughout the divorce to protect a client's assets and savings as well as ensuring that all relevant regulations are followed.

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