After filing for divorce, there is going to be a lot on your mind, and your to-do-list may feel endless. As you start dividing assets between your spouse, keep in mind that your spouse’s retirement plan can amount to a lot of money and can help create financial stability for you – but only if you file the right legal court order. In this case, you will need to file an additional order to the Domestic Relations Order (DRO), referred to as the Qualified Domestic Relations Order, or QDRO (pronounced “kwadro”).
What Is QDRO?
A Qualified Domestic Relations Order (QDRO) is a court order that divides pensions and retirement plans between spouses, following a divorce. QDRO is authorized by federal law, and it usually gives the spouse half of the value that the retirement account made during the marriage.
When Is a QDRO Form Required?
While a Domestic Relations Order (DRO) divides property between spouses, QDRO is needed for the division of retirement assets, under the Employee Retirement Income Security Act of 1974. QDRO is required for benefit plans, pension plans, 401(k), 403(b), or employee stock ownership plans.
Benefits of Filing a QDRO
Filing a QDRO benefits both spouses, even if may feel like a one-sided arrangement. The alternate payee – or the person who is recovering half of his or her spouse’s retirement plan – clearly has a lot to gain. What about the other spouse who is losing half of the benefits he or she has earned? After a QDRO, the other spouse (also called “participant”) benefits in the following ways:
- They won’t have to pay taxes on the retirement money, on behalf of the alternate payee.
- They will avoid the 10 percent penalty that follows withdrawing from retirement plans before the age of 59.9.
- Another benefit of a QDRO is it will take care of your spouse and provide him or her with financial stability after your death – instilling some peace of mind.
What if a QDRO Is Not Filed?
At the time, retirement may feel far away and anything but urgent. Remember that filing a QDRO without delay is important whether your spouse is close to retirement or not. Delaying QDRO, or not filing one at all, can directly impact the resolution of your divorce settlement; it can be the reason you do not recover your share retroactively.
Do not put off filing a QDRO; the following instances could affect your share of money:
- Your spouse could take a loan
- Your spouse could relocate
- Your spouse could withdraw funds
- Your spouse could move funds to another account
- Records that are needed for the QDRO may no longer exist
- Death may precede retirement
- Your spouse may be close to retirement
Contact an Attorney for Guidance
A retirement plan can be one of the most important assets in a marriage, but it can often get overlooked or left behind. Filing for divorce is a lot to deal with and can feel like a burden on its own. The best way to ease that burden and prioritize filing a QDRO is by hiring an experienced divorce attorney who will be there to help you properly draft the order, and get it submitted and approved.