LEGAL GUIDE
Written by attorney Eric Carlisle Nelson | Mar 20, 2011

Apportionment of Pension and Retirement Interests in Minnesota Divorce

Frequently, one party or the other has acquired a pension or retirement interest of some kind during the marriage. The portion of such a retirement interest that was acquired during the marriage is marital property, and becomes part of the marital estate subject to a “just and equitable" (usually 50-50) apportionment. In cases where a retirement account is partly marital and partly non-marital, an accountant will normally need to be retained to determine the marital versus non-marital values. If there are not enough other marital assets to compensate the other spouse for half of the marital value of the retirement interest, then the Court will order the distribution through what is known as a Qualified Domestic Relations Order, or QDRO (pronounced “quadro," in legal jargon). This is a way of dividing a tax-sheltered retirement account between divorcing spouses without incurring any adverse tax consequences as a result of the division. If there is a need for either party to immediately obtain distributions from a retirement account, a QDRO is a way to accomplish this in divorce proceedings without incurring the normal 10% early withdrawal penalty (although you’ll still be liable for income tax on the withdrawal). [1] Note that this only applies to qualified retirement accounts such as 401(k)s, 403(b)s, etc. [2] It does not apply to IRAs or pensions.

Footnotes:

  1. 26 USCS section 72(t)(2)(C).
  2. 26 USCS section 72(t)(1).

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