What is a QDRO?
Divorce attorneys take care of a lot of the headaches related to divorces, including, but not limited to, dividing retirement accounts.
Retirement is, in some ways, a complicated issue. In some ways, it isn’t – because, in general, you get half the marital share of what was earned, and that’s not all that negotiable – but it’s not like just because you know how things will be divided that your accounts will just jump into order.
No, it’s really a matter of taking a specific series of steps to ensure that you actually get the benefit of the retirement money that you’ve received as part of your divorce.
A QDRO – which stands for qualified domestic relations order – is part of the process of dividing the retirement accounts.
A QDRO is used when we’re dividing tax deferred retirement accounts, like a 401(k) or a 403(b). It helps protect you from some of the tax consequences of dividing accounts before you’ve reached retirement age. It will, essentially, allow you to roll your money over into one account.
What is a QDRO, and how does it work?
A QDRO is a document filed with the court. In many cases, it’s filed right alongside the final decree of divorce. It’s entered by the judge, and returned to the attorney or party to the suit, so that it can be sent to the plan administrator for the retirement plan in question.
It essentially authorizes the division of the retirement account. Once the plan administrator has the QDRO, he or she has official permission from the court to go ahead and effectuate the transfer.
What does a QDRO look like?
QDROs can look different from each other, depending on the company in question. A lot of times, different companies have specific forms they want to see used, or specific language they need included. We often talk to the plan administrator to get that information, and even have them pre-approve the QDRO before we send it in to the court.
They don’t take a specific, universal form; QDROs can be different from one case (or one employer!) to the next.
What if I’m dividing an IRA or a TSP or a different kind of account?
Different accounts require you to jump through different hoops. To divide a Thrift Savings Plan (TSP), we do a TSP Order – or a retirement benefits court order. It does the same thing as a QDRO, but authorizes DFAS to go ahead and divide the account. TSP Orders are, generally speaking, easier than QDROs because they all take the same form. Since we do so many military divorces, we’re pretty well versed with what they need to contain. In a QDRO, on the other hand, they’re often highly specific and tailored to each case specifically, since what each employer requires can vary dramatically.
An IRA, though, since it’s NOT a tax deferred account (you put post-tax dollars into an IRA account) doesn’t require a QDRO or a specific order to divide it; the signed separation agreement or court order is enough. You forward it on, and the division takes place without a separate order relating to the division of the account.
Do I need a lawyer for a QDRO, TSP order, division of an IRA, or other retirement account?
Well, no. You certainly are not ever required to hire an attorney. But, that being said, these are often fairly complex, so you may find that you’re not able to navigate it on your own.
This is an area where I think it’s also important to really discuss your expectations with your attorney. Some attorneys do QDROs as a matter of course during the divorce process; for others, you must specifically retain them to handle the QDRO. A simple question about whether this service is included is a conversation well worth having. Without filing the right paperwork, both with the court and with any relevant plan administrator, you may find that you don’t get the retirement benefits that you are entitled to receive.
You can do it on your own, or with the help of an attorney – it’s entirely up to you.
My attorney didn’t get a QDRO entered in my case! Am I SOL?
No. Sometimes these things get entered years later – but I do think you’re going to want to get it entered sooner rather than later. The money won’t get transferred without the QDRO, so you need to get it done.
Talk to an attorney to discuss your options for getting your QDRO, even after your divorce has long since been finalized.
For more information, or to schedule a consultation with an attorney, give our office a call at 757-425-5200.