What Gets Shared In Legal Divorces

By Staff Writer

If you go through a legal divorce, what will happen to your share of retirement benefits, Social Security benefits, and shares of a co-owned business? These are issues that must be negotiated as part of your divorce settlement. State divorce laws may differ on some financial points, but generally, you and your spouse have three different options.

First, you can share the benefits in a Legal Divorce. If you choose this option, you will probably need a Qualified Domestic Relations Order (QDRO), which is a special type of court order that directs a retirement plan administrator to disperse benefits directly to you and your spouse after divorce in accordance with your divorce separation agreements or with a judge's decision. QDROs are complicated legal documents that need to be executed by attorneys; a badly drawn QDRO can jeopardize your future payments.

The second option is to let the spouse who has earned the benefits retain them, and provide an equal asset to the other spouse. Judges often prefer this method because it is easiest. The third way is to give the spouse who has not earned the benefits a lump-sum payment now which represents his or her share. If you use this method, make sure you talk to your accountant first about the tax consequences of a lump-sum payment.

How a Legal Divorce Splits a Business
If you and your spouse share a business, you will need your bookkeeper and accountant to come up with a market value to the business. Make sure both you and your spouse have accountants, so that you are not taking a market value only from your spouse's accountant. Then the spouse can buy you out over time, or give you a lump-sum payment or stock options as your share. You will need an attorney well-versed in business law as well as family divorce law.