What is a QDRO?

May 10, 2023
By Alternative Divorce Solutions

Property division is a significant part of any divorce, so much so that it can affect assets and properties you might not have even realized could be divided. Retirement accounts, including 401(k) and pension plans are usually part of the asset division in a divorce. So, if you or your spouse have a retirement account, a 401(k), or a pension plan, that account(s) could be split in a divorce.

In many cases, a QDRO is needed to split these types of Accounts. A QDRO, short for Qualified Domestic Relations Order, is prepared by a QDRO attorney.

A QDRO is a court order that allows a retirement plan, pension, 401(k), and similar assets to be split during property division WITHOUT facing taxation and penalty issues. At times, without a QDRO, such assets are generally not divisible. A QDRO attorney can assist you in determining if a QDRO is required to divide your plan following a divorce. Some types of accounts that do require QDROs are pensions, 401(k)s, and 403(b)s.

What is an Alternate Payee?

An alternate payee is a person who gains the right to a portion of the retirement benefits earned by the original owner or retirement plan participant. In a case involving a QDRO, an alternate payee will most often be a spouse or ex-spouse who has marital property rights awarded during a divorce. Alternate payees can also be children if the QDRO is established to use retirement assets to pay child support.

Of note: A QDRO will usually only consider retirement assets that grew or were obtained during the course of the marriage. Retirement assets that you accrued before getting married can be considered separate property, which are not divided.

QDRO Benefits

Retirement plan administrators usually can’t split the plan participant’s funds or assets to benefit an alternate payee, even if the participant requests it. This limitation makes a QDRO a necessary additional step. But you shouldn’t see it as a burden. When drafted correctly by a QDRO lawyer, a QDRO can be beneficial to all parties involved by eliminating guesswork, improving transparency, and generally expediting the retirement fund transfer process.

The spouse who was the original retirement plan participant and is now making a payout to the other will not suffer an early withdrawal penalty, which the Internal Revenue Service (IRS) would have normally used in other situations. The spouse who is receiving the funds also will not have those funds taxed as long as they go into their own retirement account or plan. If the funds aren’t used for retirement, then there could be additional taxes on the beneficiary spouse, but there won’t be any for the spouse making the payout. In this way, reduced tax implication is another benefit of a QDRO.

Lastly, a QDRO can bring the benefit of peace of mind. Both spouses will feel more comfortable with the situation knowing that it is being done correctly and carried out under the guidance of a professional QDRO attorney.

How Do You File a QDRO?

Dividing retirement assets is a highly complicated process with serious potential for complications if not handled correctly. For this reason, QDROs are usually drafted and filed by experienced QDRO attorneys and divorce lawyers only. As mentioned, a QDRO might not even be required in all divorces that involve retirement plans, so you shouldn’t assume that you have to make one. With a QDRO lawyer working on your behalf, they can first help you decide if a QDRO is necessary.

Alternative Divorce Solutions has a team of California QDRO attorneys waiting to help you. Using our decades of collective legal experience, we can help you move through the most complex of family law contests, including those that involve QDROs and retirement accounts. Contact us online or call 949-368-2121 to request a free consultation. With multiple office locations and virtual services, we can help clients in all California counties.


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