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Be aware of common "hidden" divorce fees

When a Colorado couple is divorcing, a great deal of focus is placed on dividing marital assets. It is easy to become overwhelmed with the sheer number of choices that must be made, and that increases the risk of missing fines and fees that can sometimes be avoided during a divorce. An example lies in fees associated with the division of a 401(k) plan.

When dividing a 401(k), a couple will need a qualified domestic relations order, or QDRO. This is the document that outlines how the plan is to be split. While some plans do not charge a fee for the preparation of a QDRO, others tack on between $300 and $1,200 for that service.

A fee that nears $1,000 for the preparation of one document may seem excessive to many. There are some financial experts that claim that these fees are perfectly justified. Others, however, feel strongly that the fees are little more than a chance for plan administrators to increase profit margins.

Colorado spouses who are preparing to divorce should contact their 401(k) plan administrator to determine if a fee will be charged for preparing the QDRO. If so, that fee is often lower if there are no errors when the document is ordered. In cases where the fee is high, the couple may choose to leave the plan intact, and to pay the other spouse a larger share of different assets to make up for the lost value in the 401(k). No matter what option is chosen, spouses should make an effort to reduce costs whenever possible, which leaves more wealth to be divided between the parties.  

Source: Bloomberg, "The Divorce Penalty: This 401(k) Fee Can Add Insult to Injury", Suzanne Woolley, Jan. 23, 2017

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