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Retirement benefits require special consideration in a divorce


Minnesota residents may have invested in insurance policies and other retirement plans to ensure that enough money is available when they retire or if they become unable to work. However, property division during a divorce may affect well-laid retirement plans.

Pensions and 401(k) plans are complicated to divide when compared to IRAs. The former plans require a Qualified Domestic Relations Order for division, whereas a copy of the divorce agreement is the only document required for an IRA split. In case of death of a spouse, the beneficiary listed on the accounts will be entitled to the assets unless a QRDO stipulates otherwise. Spouses can also decide on dividing certain employer retirement plans. If a spouse does not want a share ERISA benefits, a notarized signature waiving beneficiary rights may be helpful.

Along with retirement plans, all marital property may be subjected to division. The number of years the couple was married, the earning capability of each spouse, minor children and growth potential of assets may be taken into consideration when dividing property. Sometimes the division of property may not be equal, with outcomes such as one spouse getting the house and the other getting all retirement plans.

In certain cases, the divorce decree may require that the ex-spouse is mentioned as an insurance policy beneficiary. When there is no such requirement, the policy owner can replace the beneficiary. Sometimes, the policy owner may forget to change the beneficiary post-divorce, and the ex-spouse may continue to receive a benefit even after the divorce. A person should be very careful while working on policies and the divorce agreement to ensure that the intended beneficiary gets the benefits from the insurance policies as wanted by the owner.

Source: Mainstreet.com, "How Divorce Impacts Beneficiary Status of IRAs, 401(k)s and Insurance," Juliette Fairley, July 30, 2014

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