Successful Representation Across Multiple Areas Of Law

What’s a QDRO? Do you need one in your divorce?

On Behalf of | May 17, 2023 | Divorce |

Not all divorces are alike. A couple that has only been married for a year, for example, may have few joint assets (or few assets at all), which can make the financial part of divorce relatively simple compared to couples that have been together a long time and have built up a considerable nest egg.

That nest egg, especially if it’s tucked away in one spouse’s retirement account, can be challenging to divide. In many cases, you may need a qualified domestic relations order (QDRO).

What’s a QDRO?

QDROs are legal judgments created in regards to a divorce to direct the division of one spouse’s retirement plan between both spouses. Its essential function is to protect the rights of a former spouse as an alternate payee, and to make sure that the division is carried out properly according to both the Internal Revenue Service’s code and the Employee Retirement Income Security Act (ERISA).

QDROs are not applicable to every retirement plan, only those covered under the Employee Income Security Act. IRAs, for example, are not included in this category. They may also be limited in power, especially if the retirement plan in question already has a QDRO. For example, if the spouse with the hefty retirement plan has a former spouse with a QDRO, a new QDRO for the current spouse cannot disturb the prior spouse’s benefits.

During the divorce process, couples generally try to negotiate the details of the retirement plan’s division. If that fails, the court can step in and decide what’s fair. Once that’s been decided, the QDRO will outline all the details, including what percentage or dollar amount will be paid to each party, how it will be paid and when. After the QDRO is approved by the court, it is sent to the administrator of the retirement plan, and the monies can be paid directly to the alternate payee (usually without the tax penalties normally created by early withdrawals).

If you could benefit from a QDRO, don’t hesitate to seek legal guidance and support.