Ryan Fuchs, Financial Planner
Expounding on Eric's answer, I've also seen situations where, if there was a discrepancy in the values of the 401k accounts, the court can "make it up" from other assets.
For example, if there is essentially a $10,000 transfer that needs to happen as in Eric's example, the court could split a $100,000 savings account $60,000 to the spouse with the smaller 401k and $40,000 to the spouse with the larger 401k.
Usually, the court's goal is to make sure any divorce agreement is equitable (note that that does not necessarily mean everything is split 50/50), and they will usually try to do it as efficiently as possible.
At the end of the day, this is a legal question and the only way to be certain would be to seek the advice and guidance of an attorney, which I would suggest doing for a concrete answer, since the laws of each state can differ on situations like these.
Eric Schaefer, Financial Advisor
It really depends on what the court approved settlement says, but I'll use an example to explain how monies might change hands.
John has a $100,000 401(k) at IBM, where he works. Suzie has an $80,000 401(k) at Oracle, where she works. During the divorce precedings they agree to split all retirement assets evenly, assuming they both started working at their current employers after they were married. Both parties and the judge sign off on the settlement and John is deemed to "owe" Suzie $10,000 of his 401(k).
John's HR team would get in contact with the 401(k) custodian, which for IBM was Fidelity last time I checked. John recieves paperwork for a QDRO, or Qualified Domestic Relations Order transfer. John signs the paperwork, provides certified copies of the settlement paperwork and sends to the custodian. The custodian would either open an account in Suzie's name for the $10,000, they would offer her roll over the payment into her IRA/401(k), or send a check payable to her less taxes.
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