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Is a QDRO worth the money spent on drafting the document?

On Behalf of | Oct 14, 2023 | Division Of Pensions

Divorce can be a very lengthy, stressful and expensive process. The average person will breathe a profound sigh of relief when they have fully resolved their divorce. Signing an agreement related to property division or getting a final order from the courts may make people feel as though the worst of the process is behind them.

Yet, the practical side of divorce isn’t always complete when a final order is signed. For example, some people fail to take crucial steps after the creation of the property division order that are necessary for their own protection. For example, those who need to divide retirement savings to comply with a property division order may need to go back to an attorney to have them draft a qualified domestic relations order (QDRO). Failing to draft and properly record a QDRO could lead to financial challenges, especially for the spouse who needs to receive a portion of the account.

Those with savings have a lot to lose

The process of drafting and recording a QDRO after a divorce will take far less time than negotiating the property division settlement initially. Compared to the losses that are possible without the proper recording of the QDRO, the cost of putting the document together is minimal.

There are two likely ways that people could lose a substantial amount of their retirement savings if they do not draft a QDRO. The first is through taxes and fees when they split the account. People may have to pay a 10% tax on the amount they withdraw before reaching the proper age.

The other risk is misconduct on the part of the spouse who holds the account. They could withdraw funds from it if there is a delay in handling the QDRO. Their actions could significantly reduce the total value of the account and therefore the amount that the other spouse receives.

Even though people are often eager to wash their hands of the divorce process as soon as their court obligations are over, following through with the creation and recording of a QDRO is crucial for someone’s long-term financial protection. Taking the time to create and record a QDRO can be of the utmost importance for those who need to obtain a share of retirement savings granted to them during divorce.