Prior results do not guarantee a similar outcome.

Divorce often turns people’s worlds upside-down. The plans that people made for a future with their spouses have to be cast aside and people have to make a fresh start after a divorce. Decisions that a couple made during marriage can have an effect on a person’s life after the marriage. These decisions also affect the property distribution in a divorce proceeding. One of the ways that courts distribute retirement assets is through Qualified Domestic Relations Orders (QDRO).

Need for a Qualified Domestic Relations Order

In a situation when one spouse has been out of the labor market, raising children, for example, a divorce can be particularly upsetting financially. The spouse who did not work will probably get a job with far less earning capacity than the spouse who worked the entire marriage, and that spouse will have less time to build up a retirement savings of his or her own. In contrast, the spouse who worked for the whole marriage would have had time to increase his or her wages and save for retirement or build a pension.

All assets that a couple acquires during a marriage are marital property, including retirement savings and pensions. Even though these assets may be in the name of only one spouse, the law views the assets as coming from the joint work of the couple and also belonging to the couple. When the parties divorce, each person is entitled to a portion of those assets.

How a Qualified Domestic Relations Order Works

The way to ensure that the person whose name is not on the account or pension plan receives payment from it is through the preparation of a QDRO. Federal law defines a QDRO as a court order “that creates or recognizes the existence of an alternate payee’s right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a retirement plan.” Once the QDRO is executed by a judge, it gets filed with the retirement plan.

A QDRO lets an employer know that the employer must make payments from a retirement account or pension plan to another person other than the account holder – namely the former spouse.

Complexities of Qualified Domestic Relations Orders

The concept of a QDRO is seemingly simple, but can become complex in execution. Inclusion of or leaving out one or two words can change volumes. For example, if the QDRO only specifies the “marital portion” of the account, rather than the entire account, or if it discusses the “vested” portion of a pension rather than the whole pension, the effects can be devastating to a person who is relying on that income for retirement after a divorce.

Not all retirement plans will call for a QDRO. Military families will be filing for a military DRO, in which the interest in the military pension will be dependent upon the length of the marriage as well as the amount of service time accrued by the military member. Other retirement plans may also call for other types of DROs that may differ slightly from a QDRO.

Dividing retirement assets can get complicated. If you are going through a divorce, seek the assistance of an experienced family law attorney skilled in property distribution who can ensure that you get an equitable share of your marital assets.

A Qualified Domestic Relations Order can help a former spouse who’s in a disadvantageous financial state at the time of the separation. This article is brought to you by Larkin Ingrassia, LLP.

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