Dividing Retirement Assets
Arizona is a community property state, so even though your retirement accounts are held in your name only, you will need to split these assets with your spouse. Each spouse will receive half of the retirement assets, since funds were likely added or increased in value, during the marriage.
If you have an IRA, you will split this through a transfer incident to divorce, and you must provide details in your divorce decree. After court approval, you must give your IRA’s custodian a copy; they split your account into the shares agreed upon. Your spouse will receive their portion of your IRA’s assets in their own IRA and will have to pay taxes on any distributions. Some people split the assets in their IRA after cashing them out. This may seem easier, but you will end up shouldering the tax burden, and could face similar consequences if you fail to label your transfer correctly in your divorce decree.
If you are dividing a 401(k) or a pension plan, you will divide these through a qualified domestic relations order (QDRO). After signing your QDRO, it must be approved by a judge to be enforceable; then the QDRO is provided to your plan’s administrator, who divides your assets and make distributions to your spouse based on the order. Your spouse will be responsible for paying taxes on their distributions.