Dividing Pension May Have Tax Consequences

I previously posted on one installment of a series of articles on Basic Tax Questions for Divorcing Parties Answered.

A later installment in the series focuses on division of pension plans, IRAs and the like.

As the article explains, pension plans are often divided via special court orders called QDROs that cause the plan administrator to make part of the former employee’s pension payments directly to the former spouse.

The QDRO does not alter the total pension package payable as a result of the one spouse’s participation in the plan.

QDROs must be prepared with meticulous care. Errors can lead to inability to roll a benefit into another qualified plan without a tax event occurring.

After the divorce is finalized, it is prudent to update all beneficiary designations.

Read more in this Lancaster [PA] Intelligencer Journal article: Tax issues in divorce and separation – Dividing retirement plans and IRAs.