Professional couples in New York contemplating divorce have to address numerous different resources when negotiating with one another or presenting their case to a family law judge. Retirement savings are often a sticking point in divorce negotiations, as both spouses may worry about their future financial stability during retirement.
Although many couples end up dividing their retirement savings, they can at least reduce the losses they incur by following a specific process. If the courts approve a qualified domestic relations order (QDRO) and the spouses submit that document to divide the retirement account, they typically won’t have to worry about taxes, fees and penalties.
Often, those preparing for divorce do not understand the process of creating and filing a QDRO. Who puts this crucial document together?
A judge will not draft the QDRO
Many documents required in the divorce, such as the final decree, come directly from the courts themselves. However, a judge will not put together a QDRO on behalf of divorcing spouses even if they order the division of retirement accounts.
The spouses will need to have one of their lawyers handle that process. Either spouse’s lawyer could draft the QDRO, which is one reason why court approval is part of the process. By requiring a review to ensure the document aligns with the property division decree, the courts prevent abuses where one spouse might diminish the other’s share of an account.
Without legal guidance, the risk of spouses failing to draft or record the document is significant. People may tell themselves they’ll take care of it when they’ve had time to recover from the divorce, only to forget about it for several years. Lengthy delays in the submission of a QDRO can potentially lead to a reduction in account balances that can affect the other spouse’s share.
The right process can protect your future
Mistakes when drafting or recording a QDRO could cost someone many thousands of dollars and make it harder for them to rebuild after their divorce. Understanding the steps required to properly divide retirement savings, like creating a QDRO, will benefit those preparing for a high-asset New York divorce or trying to tie up all the loose ends after one.