What is a QDRO, and do you need one in your divorce?

On Behalf of | May 29, 2021 | property division | 0 comments

Every divorce is inherently unique. Couples will have different conflicts, needs and assets. There is no one-size-fits-all solution, which is why it is almost impossible for couples to know how their pending divorce will end unless they have an ironclad prenuptial agreement.

Your family size and assets will determine what paperwork and hearings are necessary as part of your upcoming divorce. One document that people frequently flying plays an important role in their divorce is the Qualified Domestic Relations Order (QDRO). What does this document do, and will you need one in your divorce?

A QDRO helps split your retirement assets without penalty

Whether you have an employer-sponsored retirement account or a 401(k) that you fund yourself from every paycheck, retirement savings are often one of the biggest assets a couple will have to split when they divorce. You don’t want to pay taxes and penalties on top of splitting the account.

If both of you contributed to the same account, you will both be dependent on it for your retirement. Even if only one spouse contributed to the account, marital property rights may entitle their spouse to some portion of the account value.

When either the couple or the judge presiding over the divorce determines how to split those retirement savings, the attorneys can then draft a QDRO. They submit it to the courts for approval and then to the plan administrator in charge of the retirement fund. When properly executed, a QDRO will prevent you from incurring penalties or fees due to the divorce-related division of retirement savings.