Navigating the potential tax consequences when dividing retirement accounts during a divorce can be more than overwhelming. Because many spouses often look to save money, especially during a divorce, it’s crucial that you understand how Indiana’s equitable distribution laws impact your taxes during and after a divorce, and how the Indiana QDRO checklist can benefit you.

​Stange Law Firm, PC: Indiana’s Trusted Property Division Team

​The property division attorneys at Stange Law Firm, PC know how stressful life can be when a divorce takes over your days. We have years of experience helping Indiana residents successfully navigate complex family law issues, including the division of debts and assets in a divorce. We work tirelessly to help our clients protect their financial security and their interests throughout every step of the divorce process, ensuring assets such as retirement accounts are divided fairly.

​Avoiding Additional Tax Costs During an Indiana Divorce

​The following are some of the strongest ways you can prepare for divorce and protect yourself from additional taxes after an Indiana divorce:

  • Use a Qualified Domestic Relations Order (QDRO): Retirement accounts may include a 401(k), a Roth IRA, or other qualified plan. An alternate payee can obtain the right to accept benefits from a retirement plan. The transfer from the retirement account to the payee’s personal plan does not carry any tax burden. Using a QDRO is often one of the smartest ways spouses can save money on taxes after a divorce.
  • Trustee-to-Trustee Transfer: A trustee-to-trustee transfer is also a beneficial tool for parties who hold IRAs. A bank transmits the account funds from an old IRA into a new IRA for the other party. This process reduces the tax burden on the IRA funds. Although retirement plans earned during the marriage are considered marital property under Indiana law, it is possible to reduce the amount of taxes the parties must pay.

401(k) Division in Indiana

​In 2025, approximately 191,000 retirees or their beneficiaries received benefits from the Indiana Public Retirement System (INPRS), emphasizing just how many people depend on retirement funds throughout the state.

401(k)s are classified as marital assets according to Indiana law. This means they must be divided evenly between spouses according to equitable distribution guidelines. Courts will issue a Qualified Domestic Relations Order (QDRO), which allows the parties to take advantage of tax-free transfers, but only between spouses. It is important to note that pre-marital contributions to a 401(k) are classified as separate property under Indiana law.

​A spouse who uses a QDRO will have the funds transferred from the old 401(k) into a different retirement account, such as another 401(k) or a Roth IRA. To better understand your rights and how to navigate using legal tools such as a QDRO, you should hire an experienced divorce lawyer.

​Hire a Property Division Lawyer You Can Trust in Indiana​

Property division during Indiana divorces can become complex quickly, especially when you’re dealing with valuable assets like retirement accounts. Luckily, when you hire an experienced family lawyer from Stange Law Firm, PC, you can trust that you’ll receive the knowledge, tools, and support you need to successfully navigate your situation. We’ve helped countless clients protect their finances throughout the divorce process and are ready to do the same for you.​

FAQs​

How Do I Avoid Taxes on QDRO in Indiana?

If you want to avoid taxes on a QDRO in Indiana, then you should attempt to transfer or roll over the assets involved. It’s important to note that individuals do not avoid paying taxes when a QDRO is distributed. Instead, the individual receiving the assets involved will likely have to pay a tax. This is because the money is classified as taxable income at the moment of distribution. To learn more about the tax implications of a QDRO, consult a skilled lawyer.

Who Pays Taxes on a 401(k) That Is Split in an Indiana Divorce?

401(k) accounts obtained during a marriage in Indiana are classified as marital property under state law. These accounts are generally divided under Indiana equal distribution guidelines. However, a QDRO permits funds to be transmitted to a new account without tax penalties. The tax payment is deducted once the funds are withdrawn from the new account. However, the court must issue a QDRO for individuals to take advantage of the tax benefit.

Can You Take Money From a QDRO Without Penalty in Indiana?​

Under Indiana law, a recipient may withdraw funds from a QDRO without paying a fee. The alternate payee, who is the spouse who receives the funds, can access the money for divorce settlements as well. However, income tax must be paid on QDROs unless they are rolled over into an IRA account. An experienced lawyer from our firm can help you better understand how to set up and legally use a QDRO in Indiana.

How Is a QDRO Paid Out During a Divorce in Indiana?

QDRO is an acronym that stands for Qualified Domestic Relations Order. This legal tool divides retirement accounts under Indiana’s equal division of property law, which means that the funds within the account are split 50/50. The administrator pays a single amount, a transfer to an IRA, or successive payments, which avoids taxes until the payee withdraws the funds.

​Ask Our Experienced Divorce Lawyers About Dividing Retirement Accounts Today

Dividing retirement accounts during a divorce in Indiana is a complex process. Indiana property division laws can be confusing, and having a seasoned property division attorney on your side can help you discover the most effective ways to protect your assets. The attorneys at Stange Law Firm, PC, can provide you with the guidance and instruction you need to ensure you receive all tax benefits available to you.

​Our firm provides trusted legal representation throughout Indiana, and our efforts benefit both families and our communities. Contact the Stange Law Firm, PC, today to learn more about how you can protect your assets during a divorce in Indiana.