What is a QDRO?

On Behalf of | Sep 13, 2023 | Divorce |

Many couples are aware that if they decide to divorce, their marital property will need to be divided. This property includes retirement accounts and there is a process they must go through to ensure these assets are allocated correctly.

QDRO key elements

A Qualified Domestic Relations Order (QDRO) is a court order that outlines how retirement benefits, like a 401(k) employer-sponsored retirement plan or a pension plan, should be divided between the spouses.

There are several elements that the QDRO should contain. It should clearly identify the retirement plan, including the plan’s name and address and the account number, the spouses’ names and addresses, and details about how the benefits will be divided.

It should include when the benefits will be paid and how they will be paid. They can be paid through a lump-sum or periodic payments, for example. It must also be signed by both parties.

It’s important that it lists the name and contact information for the plan administrator and that any applicable plan documents are attached.

Additional considerations

When dividing the retirement assets, the court aims to give each spouse an equitable share. However, this does not necessarily mean that they will each receive an equal amount. There may also be tax consequences when the assets are distributed, like penalties for early withdrawal for example.

Depending on the retirement plan, the plan administrator may require both spouses to consent to the asset division, even with a QDRO in place. The rules may vary from plan to plan.

It’s very important that a QDRO is completed correctly.