Understanding Qualified Domestic Relations Orders (QDROs)
Dividing assets during a divorce can be complicated, especially regarding retirement accounts. If you or your spouse have a 401(k), pension, stock options, or other deferred benefit plans, you will likely need a Qualified Domestic Relations Order (QDRO) to ensure these assets are split correctly.
What is a Qualified Domestic Relations Order (QDRO)?
A Qualified Domestic Relations Order (QDRO) is a legal order required to divide certain retirement accounts during a divorce. Retirement funds cannot be legally transferred from one spouse to another without a QDRO, even if the divorce settlement states that the accounts should be split.
QDROs apply to 401(k) accounts, pensions, and other deferred benefit plans. They outline how much of the retirement funds belong to each spouse based on community property laws and the couple’s specific agreement or court ruling.
How is a QDRO Prepared?
The process of obtaining a QDRO follows several key steps:
1. Agreement or Court Order
Before a QDRO can be drafted, the divorcing spouses must either:
- Agree on how their retirement accounts will be divided in their marital settlement agreement or
- Receive a court order that specifies the division of these assets.
2. Hiring a QDRO Attorney
Most family law attorneys do not draft QDROs themselves. Instead, they work with attorneys who specialize in preparing these orders. A QDRO attorney is hired to handle the process once a divorce judgment is finalized or a settlement is signed.
3. Reviewing Retirement Account Statements
The QDRO attorney will collect account statements covering the period from the date of marriage to the date of separation. They analyze all transactions and activity within the accounts to determine how much is considered community property.
4. Drafting and Reviewing the QDRO
Once the QDRO attorney calculates the division, they create a draft order for both parties and their attorneys to review. This step ensures accuracy and allows both spouses to confirm the division aligns with their agreement or court ruling.
5. Submitting the QDRO for Court Approval
After approval, the final QDRO is submitted to the court for filing. Once officially recorded, the order is sent to the plan administrator (the company managing the retirement account) to ensure the division is processed correctly.
Why is a QDRO Important?
A QDRO protects both parties by ensuring the retirement accounts are split legally and fairly. Without a QDRO, a spouse may not receive the portion of retirement funds they are entitled to or face unexpected penalties and taxes when trying to access the funds.
Additionally, retirement plans have strict rules about how funds can be transferred. A QDRO ensures the division complies with legal and financial regulations, preventing unnecessary delays or complications.
Need Help With a QDRO?
If you are going through a divorce and need assistance with dividing 401(k) accounts, pensions, or other retirement assets, JWB Family Law is here to help. We understand the complexities of property division and can guide you through the process. Call us at (619) 777 5842 or click here to schedule a 30-minute consultation. Let us help you secure your financial future.
