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5 points to know about a QDRO

On Behalf of | Dec 28, 2022 | Divorce

People who are going through a divorce will have to handle the asset division process. This can be challenging for some people because of the retirement accounts that are part of it. If both individuals have a retirement account and those are equally valued, they may each keep their own account.

Getting orders for the plan administrator is a priority for those who have to divide the retirement accounts. A qualified domestic relations order, or QDRO, is required for some.

#1: QDROs aren’t automatic

The issuance of a QDRO isn’t automatic. One of the attorneys must draft the document and the court must sign off on the order. It’s up to the non-employee spouse to ensure this is done, so be sure you get one if you’re trying to retain your rightful portion of your ex’s retirement account.

#2: Some divorce attorneys don’t handle these

Not all divorce attorneys handle QDROs. If you’re just now embarking on the divorce process, check the retainer agreement to determine if this is excluded. It’s best to work with someone who’s familiar with these orders so be sure to ask your prospects if they’ve done these before.

#3: Limits apply to these orders

QDROs can only do what’s allowed by the plan. They can’t require a plan to transfer funds that aren’t available in the retirement account. It’s best to review the plan’s guidelines and rules before creating a QDRO.

#4: Completion during divorce is best

Until the divorce is finalized, you may have a claim to some of the retirement account. Once the divorce is finalized, that’s not the case. Because of this, it’s best to get the QDRO as part of the divorce so you can ensure you’ll be able to get what you’re entitled to.

#5: Not all plans need a QDRO

Not all retirement accounts need a QDRO. IRAs, for example, don’t use QDROs. If you have a 401(k), a 403(b), or another qualified plan, you’ll need the QDRO issued if the account has to be divided.

Retirement benefits are one of the more complex assets to divide during the divorce. Making sure you get this taken care of is crucial because it can directly impact your future. You can’t let the other aspects of the divorce fall by the wayside. Instead, you have to keep things balanced so you walk away with a settlement that’s in your best interests.