What is a QDRO? Dividing Retirement Plans in Divorce

QDRO Dividing Retirement Plans in Divorce

Virtually all property that has been accumulated during the marriage (“marital property”) is subject to be divided between the divorcing husband and wife. Almost everything of value is considered property, including retirement plans and accounts.

Certain retirement plans such as IRAs and Tax Deferred Savings plans are easily divided by transferring some or all of the balance to a similar account in the name of the other spouse. They are termed “contribution plans” because they are defined by the amounts contributed, plus interest . As long as transfer of this type of retirement plan is done by one trustee to the other, tax and penalties are avoided.

To divide or transfer any part of most other retirement plans and pensions (other than civil service, military retirement, and Federal Employee Retirement System plans) a court order called a Qualified Domestic Relations Order (QDRO) must be secured. Usually, a professional is needed to prepare the order (an attorney or certain services that specialize in preparing QDROs).

The first step in negotiating the division of retirement plans is determining what you have and figure out its value. For some plans such as an IRA or a 401K which is defined in terms of its contributions (either by you, your employer or a combination of both) all that is needed to determine its value is to check the balance on the most recent statement. Other plans which are defined in terms of its benefits (i.e. pensions) determining the value of is more difficult and may require the services of an expert, especially if there is a large benefit or you are close to retirement.

Retirement is one of the most difficult and important areas of divorce law. Mistakes can destroy your retirement, or even worse, you may not learn of the mistake until you are ready to retire. Make sure that your attorney and mediator have the requisite knowledge to help you in this area, or if they do not, that they bring in pension experts to provide guidance and assistance.

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