Should Married Couples Maintain Joint or Separate Accounts In Preparing for Retirement?

Some married couples prefer to keep their finances separate during their working years. For example, one in five married keep separate bank accounts, and a third maintain their own credit cards. These couples often discover that this arrangement works less well once they move into retirement.

It is highly unlikely that both spouses will have equal retirement incomes or expenses, but they may have different ideas about what spending looks like once they stop working. Retiring couples should consider how their respective income sources, likely health care costs, insurance needs, and proposed discretionary spending will affect how they manage their finances.

The tax treatment of each spouses’ income may make it advantageous to draw from one income source over another. If one spouse has access to after-tax funds, from a Roth IRA, for example, it might be better to draw down that account first, and let the other’s traditional IRA continue to grow tax-deferred. Couples may want to coordinate when each will begin collecting Social Security benefits as well.

If one or both spouses was previously divorced, they may have been awarded a portion of their former spouse’s retirement. A Qualified Domestic Relations Order (or QDRO) may have been necessary to divide that asset. If this situation applies to you, and you are not sure that a QDRO was prepared, it probably wasn’t, and you should consult an attorney who specializes in QDROs right away.

Out of pocket health care costs are likely to increase for both parties over time, but not always equally. A retiring couple should determine the amount of their Medicare and any private health care premiums, estimate out of pocket costs, and discuss how these expenses will be paid.

Keeping separate finances may make life insurance or long-term care insurance more important for some. One spouse may be unable to bear the financial burden when the other has increased expenses, or is no longer contributing. Couples should take this “survivor-income stress test” and consider how the death of one spouse would affect the ability of the other to pay expenses.

Many people look forward to travelling more during their retirement, but however a couple chooses to spend their increased free time, how the expenses are to be divided should not be overlooked. The discussion on this issue, as well as the others noted above, is best had before retirement, not after.

Three Reasons Why You Should Refer Clients to Las Vegas QDRO to Prepare Qualified Domestic Relations Orders

Three Reasons Why You Should Refer Your Clients to Las Vegas QDRO to prepare Qualified Domestic Relations Orders: Every QDRO is reviewed by a Nevada Certified Family Law Specialist attorney. Shann D. Winesett, Esq., is a Nevada Certified Family Law Specialist, has a perfect 10 rating on AVVO and currently sits on the Executive Counsel […]

5 Essential Questions About Las Vegas Qualified Domestic Relations Orders (QDRO)

Five Essential Questions

 

1. What is a Qualified Domestic Relations Order?

A qualified domestic relations order or “QDRO” is a state court judgment, decree or order for a retirement plan to pay child support, alimony or marital property rights to a spouse, former spouse, child or other dependent of a participant.

 

2. Why is a Qualified Domestic Relations Order necessary?

To ensure that pensions and retirement accounts remain secure, Congress passed legislation which prohibits the alienation or transfer of pension/retirement benefits to anyone other than the participant in the plan. Excepted from the anti-alienation provisions of federal law are spouses, former spouses, children and dependents. For this special class of persons to receive all or a portion of the retirement benefits, a court must issue a QDRO directing the retirement plan to transfer the benefits.

 

3. When should a Qualified Domestic Relations Order be obtained?

It is highly recommended that the QDRO be issued at or very near the time your decree of divorce is entered. If you are the alternate payee and your spouse dies after your divorce but before the QDRO is approved by the plan administrator and entered as an order, you may lose your right to share in the your spouse’s retirement benefits. Similarly, if the retirement benefits go into pay status before the QDRO is approved, the benefits to which you would otherwise be entitled could be substantially curtailed.

4. Is a divorce required for a QDRO?

A divorce is not required for the issuance of a QDRO. While QDROs are normally associated with the division of retirement benefits during a marital dissolution, QDRO’s can also be issued to pay maintenance during marriage or for the support of children or other dependents. Courts have also issued In-Marriage QDRO’s® to divide qualified retirement plans between happily married spouses.

5. Does a QDRO require a lawyer?

No. A lawyer is not required but highly recommended. Many plan administrators have their own form QDROs that the plan encourages the participant and alternate payee to use. These forms are drafted with the interests of the plan in mind not the participant or alternate payee. Some plan forms are better than others, but many have stock provisions which deprive alternate payees of retirement interests that an independently drafted QDRO would address. If you are in need of a QDRO, please call Las Vegas QDRO’s for a free consultation.

Be Wary Of QDRO Services That Sound Too Good To Be True

QDRO MILLS: Be Afraid, Very Afraid

Do an internet search for “QDRO services” and you will find clickbait promising “quick and easy” QDRO preparation for as little as $299.

Don’t fall for it.

Qualified domestic relations orders are not necessarily complex documents, but one size does not fit all, especially when the orders cross state lines.

For most families, retirement is, by far, the single most valuable asset. Why trust that asset to an online form which might not provide you with all the benefits which the law provides?

Many QDRO mills utilize the plan administrator’s forms and provide no attorney supervision over the QDROs they prepare.

Why is this a problem? Because the plan administrator’s intent in preparing the form is to simplify the processing of the QDRO not to ensure that the retirement is divided as the parties or the courts intend.

What is the significance of the valuation date?

How are gains and losses treated?

What happens to outstanding loans?

Are survivorship interests addressed?

Who pays the taxes?

These are just some of the issues that arise in the division of retirement plans. If the QDRO does not address these issues explicitly, the plan will answer them by default.

Don’t trust your most valuable asset to the vagaries of a one-size-fits-all domestic relations order. Call Las Vegas QDRO today (702) 263-8438 for a free consultation.