Using a qualified domestic relations order when dividing up retirement accounts in divorce

When you’re going through a divorce, you have to divide up the marital assets. This includes everything from the house and vehicles to your respective retirement accounts.  For some people, the division of retirement accounts is easy because each spouse has an account and the value of each person’s accounts are roughly the same. But what if they aren’t?

You may be due part of your spouse’s retirement

There are situations in which there is a great difference between retirement accounts or when one party doesn’t have a retirement account at all. In those circumstances, the retirement accounts will usually have to be divided in some way.  Obviously, this is a complicated process that will likely require some negotiations, but it’s almost always important to get a qualified domestic relations order in place.

What is a qualified domestic relations order?

The qualified domestic relations order, or QDRO, is valid for only certain retirement plans. This includes 401(k) plans, but it doesn’t include IRAs. The QDRO is a court order that details the manner in which the plan must be split. It’s provided to the plan administrator, who can approve or deny the order. If the order is denied, it is sent back to the court for correction.  When the retirement plan is an IRA, the division is handled through the “transfer incident to divorce” instead of through the QDRO. It’s important that anyone going through a divorce has the correct documents so they can get the portion of the retirement accounts they’re due without penalties. Working with an attorney who’s familiar with handling retirement accounts during a divorce is beneficial since they can review these matters for you. They can also ensure that your rights are being respected and that you’re getting a settlement that’s in your best interests.