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Understanding QDROs: How to divide retirement assets in a divorce

On Behalf of | Mar 13, 2023 | Divorce |

Retirement assets are an essential part of marriage. They can be the source of tension when it is time to negotiate a divorce. You and your spouse planned a future together, and now it is time to decide how to proceed now that you are moving toward a divorce.

Here’s what you should know about dividing retirement assets during a divorce.

What are QDROs?

A Qualified Domestic Relations Order (QDRO) is a legal document that outlines the division of retirement assets, such as 401(k)s, pension plans and other retirement plans, during a divorce. QDROs allow the non-employee spouse to receive a portion of the retirement benefits earned by the employee spouse.

Why are QDROs important?

Without a QDRO, the non-employee spouse may not be able to access their share of the retirement assets until the employee spouse retires. This can cause significant financial strain on the non-employee spouse, especially if they rely on these assets for their retirement.

How do you navigate the QDRO process?

The QDRO process can be complex and varies depending on the specific retirement plan. Working with an experienced family law attorney who can help you navigate the process is important. They will help you ensure the QDRO is properly drafted and approved by the court and the retirement plan administrator.

Some key steps in the QDRO process include:

  • Identifying the retirement plans that you need to divide
  • Determining the percentage of the retirement assets that the non-employee spouse is entitled to
  • Drafting the QDRO to meet the specific requirements of the retirement plan
  • Submitting the QDRO to the court for approval
  • Sending the approved QDRO to the retirement plan administrator for implementation

There are many layers to the QDRO process, so it is essential to have the support of a skilled professional.

What should you consider when dividing retirement assets?

When dividing retirement assets, it is crucial to consider the tax implications of the division, as well as the long-term financial impact on both spouses. In some cases, it may be more beneficial for one spouse to receive a larger share of other assets, such as the marital home, instead of retirement assets.

It is also important to consider the specific requirements of each retirement plan, as some plans may have restrictions on asset division.

Dividing retirement assets can be a complex and challenging aspect of a divorce. QDROs can be useful in ensuring that both spouses receive their fair share of these assets. Working with an experienced family law attorney can help with the QDRO process and ensure both spouses can move forward financially after the divorce.

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