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Who needs to approve a QDRO before a 401(k) gets divided?

On Behalf of | Feb 4, 2025 | Firm News

Addressing financial resources is one of the most important and potentially contentious aspects of any divorce. Spouses often disagree on what assets they have to share and the most appropriate way to divide them.

Higher-value resources such as retirement accounts typically require special attention during divorce negotiations or litigation. If either spouse funded a 401(k) account during the marriage, the spouses may need to have an attorney draft a qualified domestic relations order (QDRO) after the courts approve a final property division order.

A QDRO requires approval before either spouse can submit it to the financial professional managing the 401(k) they need to divide. Who has to approve a QDRO before it gets submitted?

Both spouses must review the QDRO

The allocation of retirement resources can have a direct impact on financial stability after a divorce. The closer the spouses are to retirement age, the more important it becomes to preserve as much as possible of the retirement resources.

A QDRO can help people avoid tax liability and the 10% penalty the courts might impose for an early withdrawal from a tax-deferred account, such as a 401(k). By transferring a portion of the account balance into a new account established in the name of the other spouse, a QDRO helps eliminate early withdrawal penalties and tax consequences.

Generally speaking, both spouses have to review and approve the QDRO before they can use it to divide a 401(k). This can lead to delays in some cases, as one spouse may procrastinate regarding the review and signing process.

The judge must also approve the QDRO

There is always a risk of misconduct whenever there are high-value resources in play during a divorce. As such, the standard procedure for recording a QDRO requires judicial approval in addition to spousal review.

A judge has to review the finalized QDRO to ensure that it accurately reflects the terms included in the final property division order. Once the judge has reviewed and approved the QDRO, the spouses can then submit it to split the 401(k).

Following the right procedure in a timely fashion is important when using a QDRO to divide retirement savings. Spouses with sizable 401(k)s may need help drafting a QDRO and following the right procedure to use it for their financial protection.

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