What is a QDRO?
At first glance it may remind the audience of math and
complicated equations. At a second glance you begin to
understand it is more complicated than simple math.
10 things to know about QDROs.
- QDRO stands for: Qualified Domestic Relations Order.
- QDRO is a document that enforces financial claims of
parties involved in a divorce. Married couple are entitled
to any financial gains during marriage including pension and
401K. How well the order is spelled out in a divorce
determines how strong it can protect a parties financial
claim to those assets.
- QDRO requires an understanding of both Law and finances
in order to be prepared properly.
- Not all divorce attorneys practice preparing a QDRO
documents.
- A QDRO is needed when a divorce court grants a division
of a pension or retirement account a part of a distribution
of marital assets
- A QDRO can also be used to allow distributions from a
pension or retirement account for alimony and child support
payments.
- A QDRO is a court order.
- Drafting a QDRO requires information relating to a
specific pension or retirement plan.
- Language in a QDRO that distributes a defined
contribution plan (such as a 401k-type plan) is different
than the language required to distribute a defined benefit
plan (such as a pension)
- QDROs are more obscure do to their future impact than
their immediate effect. Most divorcing couple end their
marriage contract before the retirement age. Most often
QDROs kick in after the retirement age. This time gape may
cause individuals as well as attorney’s to focus on
immediate matters rather than long term financial issues
Once a dissolution of marriage has been entered by court there
may still be a way to add or change the QDRO language into the
settlement. It is crucial that all parties involved to
understand and take steps in order to protect their right to any
401K or pension they are entitled to. If you are involved in a
divorce through a mediator makes sure the QDRO agreements are
well defined. Consult with a divorce attorney that understands
QDRO from a financial point and a legal one. If not you may end
up loosing a large portion of your financial settlement.
May a QDRO be part of the divorce decree or property
settlement?
There is nothing in ERISA or the Code that requires a QDRO
(that is, the provisions that create or recognize an alternate
payee's interest in a participant's retirement benefits) be
issued as a separate judgment, decree, or order. Accordingly, a
QDRO may be included as part of a divorce decree or
court-approved property settlement, or issued as a separate
order, without affecting its qualified status. The order must
satisfy the requirements described above to be a QDRO.