27 May Dividing Retirement Accounts in WA State Divorce
If you are going through a divorce, you are probably thinking a lot about how the separation will affect your finances. When you split from your spouse, you must disentangle your financial situation, and that often entails dividing certain accounts, such as those for retirement. Here is what you need to know about dividing retirement accounts in a Washington State divorce.
Washington Is a Community Property State
Washington follows community property law, which means assets you and your spouse acquired during the marriage belong equally to both of you. That applies to retirement accounts too.
The portion of any retirement account that grew while you were married is generally split in half. However, the court will treat the portion that existed before your marriage, or after your separation, as separate property.
Types of Retirement Accounts and Their Impact
There are two main types of retirement accounts you will encounter in a divorce.
Defined Contribution Plans
Defined contribution plans—like a 401(k), 403(b), or IRA—have a tracked account balance. You can usually calculate exactly how much grew during the marriage.
Defined Benefit Plans
Defined benefit plans (like a pension) pay out a monthly benefit in retirement. These are harder to divide because the final value depends on how long the employee works and what they earn over time. An actuary or financial professional may need to calculate the marital share.
What a QDRO Is and When You Need One
To divide most employer-sponsored retirement plans, you need a court order called a Qualified Domestic Relations Order (QDRO). A QDRO instructs the plan administrator to split the account and send a share to the non-employee spouse. Without it, the plan administrator is legally barred from transferring funds.
IRAs are different. You do not need a QDRO for an IRA. Instead, the transfer is handled through a divorce decree or separation agreement, and you can move the funds directly into the other spouse’s IRA.
Tax Considerations
Done correctly, dividing a retirement account in a divorce does not trigger taxes or early withdrawal penalties. The QDRO process allows the receiving spouse to roll their share into their own retirement account without owing anything right away. The same is true for an IRA transfer if it is done as a rollover.
However, if the receiving party withdraws the money, they will owe the applicable state and federal taxes.
Get the Right Help for Property Division
Dividing retirement accounts in a Washington state divorce is not something to navigate without experienced legal guidance. If you are working through a Washington divorce, our property division attorney can help you understand what you are entitled to and how to protect it. Inquire at LaCoste Family Law today.