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What is a QDRO and who needs one?

What is a QDRO and Who Needs One?

Part of every divorce is the splitting of marital assets between spouses. This includes real estate, cars, furniture, jewelry, art, and other personal property items. Marital assets can also include retirement accounts, pension plans, and other accounts. For some, it may be necessary to include a qualified domestic relations order (QDRO) as part of the finalized divorce agreement in order to ensure that you receive a portion of the retirement accounts that you are owed as part of the divorce settlement. An experienced divorce attorney will be able to review your marital assets and advise you on whether a QDRO is necessary for your divorce.

What is a Qualified Domestic Relations Order?

A qualified domestic relations order is an order that creates or recognizes the existence of an alternate payee and the payee’s right to receive all or a portion of particular types of retirement plans. The person who created the retirement account is known as the participant and the spouse requesting funds as part of the divorce is the alternate payee. The order can be drafted by either spouse’s attorney to be submitted to the court as part of the final divorce decree. A QDRO is not required for all retirement plans included in divorce settlements, only certain types that are covered by the Employee Retirement Income Security Act (ERISA), so it is important to talk with your divorce attorney about whether the marital assets in your case qualify.

When do I Need a QDRO?

A qualified domestic relations order is necessary in order to receive all or a portion of any IRA account, private pension plan, or 401(k) plan this is being distributed in a divorce. As a general rule, the court is only allowed to divide the portion of these accounts that accrued during the course of the marriage as marital assets. In addition to your divorce attorney, it may benefit you to also utilize the services of a financial advisor to determine the proper amount that qualifies under the QDRO.

A QDRO is also necessary because the types of retirement plans protected by ERISA impose harsh penalties for early withdrawals. Federal law imposes a 10% penalty on all withdrawals that occur before the age of 59½ years old, with certain exceptions, and one of those exceptions is for withdrawals made pursuant to a divorce with a QDRO. Neither you or your spouse is required to pay the penalties if the withdrawal is made or transferred to another account with a qualified domestic relations order. A QDRO can divert retirement benefits from the participant’s account while alive or trigger withdrawal of benefits once the participant to the account dies.

Call or Contact a Lawyer Now

Failing to file a qualified domestic relations order with your final divorce decree can leave thousands of dollars on the table and you at a significant financial disadvantage after your divorce. Call or contact one of the family law attorneys at Kearney | Baker today at 626-768-2945.


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