Cindy Allen & Associates PLLC

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Costs of splitting a retirement account

Oklahoma residents who split their retirement plans during a divorce may be in for a nasty surprise. Many 401(k) accounts have a processing fee associated with them that is triggered when the owning party tries to split the assets in the account pursuant to a qualified domestic relations order. It has proven to be a source of frustration for both account holders and attorneys.

The fees are frustrating for consumers because they can be unexpectedly high. This is true even if an attorney for one of the estranged spouses is doing most of the work of filling out and preparing the form. Industry experts consider any charge of $1000 or less to be fair, but it is very possible for costs to rise beyond this. The costs also tend to increase dramatically for relatively small changes or errors in the provided form. For example, Fidelity only charges $300 for a form properly and completely submitted, but if the Fidelity-generated form is lacking its unique tracking number or is altered in any way, that charge jumps to $1200.

A Fidelity spokesperson responded to the excessive charge accusations. He said that only major changes to the form, such as attempting to change the definitions of key legal terms or the way payments are handled, would trigger the increased charge. Inconsequential changes, such as minor wording, would not result in a higher fee. Despite these assurances, there have still been lawsuits surrounding excessive transaction fees.

It is important for estranged spouses to understand the full effect splitting a retirement account in a high asset divorce may have on their settlement. This includes processing fees and other penalties that may apply. An attorney may be able to help a client understand the impacts this can have on the account and can also help ensure that the paperwork is handled properly to keep charges to a minimum.

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