QDROs Are Important
What is a QDRO? The acronym "QDRO" stands for Qualified Domestic Relation Order. This document functions to divide tax-deferred retirement assets in a divorce. It is a separate document from a divorce decree and necessary to transfer any portion of a tax deferred asset that falls under the federal ERISA statute. Generally, this refers to a 401K or pension, but not an IRA. If you have a 401K or pension (more formally known as defined contribution plan or defined benefit plan), and a portion of it is or may be awarded to your spouse in a divorce, a QDRO must be drafted, and it should be drafted by a lawyer.
A QDRO is a detailed description, or set of instructions, by which the plan administrator of a plan transfers money to a former spouse. The Court does not create QDRO, and its role is only to review and sign the QDRO after it determines that it follows the intent of the divorce decree. However, the larger challenge is that the QDRO also must be approved by plan administrator. It's your retirement account plan administrator's job to ensure that the QDRO is meets their company's compliance requirements and provides a set of instructions that is clear and unambiguous enough so that they can follow them and not get themselves into legal trouble.
The language in a QDRO is complex, but its meaning can make the difference of thousands of dollars, tens of thousands, perhaps even more, to you. That's why it is critical that you have a well drafted QDRO to ensure that you receive all of the money to which you are entitled.
QDROs often specify more detail than your divorce decree includes. (It would be best, of course, if your divorce decree was drafted by someone who understood QDROs and included the detail necessary to make an unambiguous QDRO - but that does not always happen.) For example, a QDRO includes instruction on whether or not the amount given to your former spouse includes cost of living adjustments, or a surviving spouse annuity. Does that dollar amount you agreed would be given to your spouse include gains and losses attibuted to that money from the date you agreed to the date it is finally distributed? It can take months, sometimes even years, before the money you agreed on in that mediation session finally gets to you. What happens if the market has taken off, and now that dollar amount is suddenly much less than the half you thought you were going to get? Do you know what it may cost you if your former spouse gets a surviving spouse benefit? Did you figure that cost into the over all split of your assets?
Altough it may seem as though the QDRO is a tedious, and never ending project that your lawyer negligently lets straggle after your divorce is all over, it is worth the time and effort necessary to ensure that it is right.
A QDRO is a detailed description, or set of instructions, by which the plan administrator of a plan transfers money to a former spouse. The Court does not create QDRO, and its role is only to review and sign the QDRO after it determines that it follows the intent of the divorce decree. However, the larger challenge is that the QDRO also must be approved by plan administrator. It's your retirement account plan administrator's job to ensure that the QDRO is meets their company's compliance requirements and provides a set of instructions that is clear and unambiguous enough so that they can follow them and not get themselves into legal trouble.
The language in a QDRO is complex, but its meaning can make the difference of thousands of dollars, tens of thousands, perhaps even more, to you. That's why it is critical that you have a well drafted QDRO to ensure that you receive all of the money to which you are entitled.
QDROs often specify more detail than your divorce decree includes. (It would be best, of course, if your divorce decree was drafted by someone who understood QDROs and included the detail necessary to make an unambiguous QDRO - but that does not always happen.) For example, a QDRO includes instruction on whether or not the amount given to your former spouse includes cost of living adjustments, or a surviving spouse annuity. Does that dollar amount you agreed would be given to your spouse include gains and losses attibuted to that money from the date you agreed to the date it is finally distributed? It can take months, sometimes even years, before the money you agreed on in that mediation session finally gets to you. What happens if the market has taken off, and now that dollar amount is suddenly much less than the half you thought you were going to get? Do you know what it may cost you if your former spouse gets a surviving spouse benefit? Did you figure that cost into the over all split of your assets?
Altough it may seem as though the QDRO is a tedious, and never ending project that your lawyer negligently lets straggle after your divorce is all over, it is worth the time and effort necessary to ensure that it is right.
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