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The challenge that arises if people fail to draft or file a QDRO

On Behalf of | Aug 27, 2023 | Division Of Pensions

High-asset couples that have acquired valuable property during their marriages often experience major challenges when they prepare for divorce. Dividing their resources can be very difficult. Retirement accounts are among the assets that can be the biggest challenge to properly value and divide during a divorce.

They can either negotiate their own arrangements or go to court to have a judge decide how their assets will be divided. Many couples need a qualified domestic relations order (QDRO) to divide retirement savings without penalties or taxes diminishing the value of their accounts. Unfortunately, given that this document is usually drafted after the divorce, sometimes people completely overlook the need for a QDRO.

Even if they draft the document and have it approved by the courts, they may not actually present it to the party handling the retirement account to divide their savings. Unfortunately, delays in recording a QDRO can very easily lead to an unfavorable outcome for the recipient spouse.

Delays may diminish what someone receives

In a perfect world, a spouse who knows they have an obligation to share the contents of their retirement account or pension after a divorce will do so graciously. They will preserve the assets appropriately even if there is a delay in actually splitting the account. However, not everyone comports themselves so respectfully after a divorce. There are many people who will make sizable withdrawals from their retirement accounts knowing that their spouse should receive a specific portion of it. There’s also the possibility of bad investment choices diminishing the account balance.

Whether due to investment challenges or intentional misconduct, the biggest concern for the delayed utilization of a QDRO is that the spouse who should receive a portion of the account will no longer receive the same amount they would have at the time of the divorce. Although sometimes people can go back to court, particularly when there have been inappropriate withdrawals from the account, it is usually better to quickly draft the QDRO after the divorce and submit it to have the savings divided quickly.

Taking the right steps during and immediately after a divorce can help people to preserve as much as possible of their marital estate. Seeking legal guidance is a good way to better ensure that no critical steps are overlooked as a couple moves forward with the marital dissolution process.