Dividing any retirement accounts which have accumulated during the time of your marriage is a critical step that may make the difference between financial comfort and struggle down the road. With the help of a family attorney who can help you properly draft a “qualified domestic relations order”, known as a QDRO, you can legally divide retirement accounts between you and your spouse based on agreeable terms, or, in cases where no agreement can be reached, terms determined by the judge presiding over your case.
How Does a QDRO Work?
By definition, a QDRO is an order, judgment, or legal degree that allows retirement benefits that were accumulated during marriage to be utilized for alimony or child support payments or simply to equally divide marital property. Benefits may be conferred to a child or other dependent in some cases.
In most situations, the Employment Retirement Income Security Act of 1974 (ERISA) and the IRS require penalties to be paid on any retirement contributions which are withdrawn before retirement age; a properly prepared QDRO will prevent those penalties and allow the benefits to be divided appropriately between spouses once the plan is approved by the administrator of the retirement account.
Important Details to Consider
When preparing a QDRO, many details must be considered in order to fairly divide all marital assets. Some couples choose to divide their retirement plans down the middle, but “equalizing” your plans, in cases where several retirement plans have been accumulated during your marriage, can streamline the process. Determine which partner will cover the fees related to the preparation of the QDRO which include the lawyer’s fees as well as any processing fees charged by the retirement plan itself.
You’ll also have to decide if the retirement account(s) will be divided based on a set dollar amount or a percentage of the total. A professional family attorney can help protect your rights and determine the most equitable manner to divide assets when preparing the QDRO.