Getting Divorced? Find Out If You Need A QDRO
If you're like most people, you got married "for better or worse," and never expected to end up divorced. Since you were in the marriage for the long-haul, you and your spouse acted like a team when it came to putting money aside for retirement.
Now that things have changed, however, all of that retirement money has to be split -- and it isn't an issue that can wait until you're older. Unfortunately, many people fail to realize that their order of divorce alone isn't enough to handle the issue -- and they find out months or years later that they've made a serious financial mistake.
What Is A QDRO?
To properly divide a retirement plan in a divorce, you need a Qualified Domestic Relations Order, or QDRO. This is a special type of court order which is directed at the administrator of the retirement plan involved. It not only tells the plan's administrator how to divide the funds that are in the account, but it also gives the administrator permission to do so.
All divorce decrees are considered "domestic relations orders," but not all of those orders are qualified. Being "qualified" only means that the order is in a format that is legally acceptable by the plan. For that reason, many retirement plans have QDRO forms that they are willing to provide on request -- just to make the process easier.
Why Might You Need A QDRO?
While you and your spouse were married, everything that you earned or saved was considered marital property -- even though it may have only been in one person's name. It isn't uncommon for couples to concentrate their investments in one retirement plan, rather than two, so that leaves one spouse at a disadvantage after the divorce.
If a QDRO isn't obtained and filed, the plan's administrator cannot tell what money in the account belongs solely to the named owner, what needs to be divided between the owner and the ex-spouse, or what formula to use when it is divided.
If the person named on the retirement plan retires or removes the money from the plan before the QDRO is filed, there's nothing the plan's administrator can do to get that money back -- which could open up a long legal headache for the disadvantaged spouse.
If you're going through a high-asset divorce that involves complex property issues such as retirement plans, business interests, property, and other investments, talk to a property division attorney today.