Division of Retirement
When a Court grants a decree of divorce, it will also address the parties’ rights with respect to the assets they acquired during their marriage. This includes retirement assets, such as 401(k) accounts, IRAs, and pensions.
Qualified Domestic Relations Orders (QDRO)
While the decree deals with each person’s rights to those assets, often it takes a separate order from the court to effectuate the actual division. This separate order is often referred to as a qualified domestic relations order, or QDRO. Once signed by the judge, the QDRO acts as instructions to the account administrator to divide the retirement account in accordance with the terms of the divorce decree. This is usually done by splitting the retirement account into two separate accounts — one for each party. Splitting the account through a QDRO avoids the often heavy tax penalties associated with simply withdrawing the funds and dividing them up. After the account has been divided according to the QDRO, each party is typically free to do with the retirement account whatever they want, including cashing it out (subject to normal tax penalties) or leaving it as is (and avoiding those taxes).
Preparing a QDRO can be complicated. While some parts of a QDRO’s content are required by federal law, each account administrator has their own preferred style and wording for different retirement programs. This combination of mandatory content with varying styles can make preparing a QDRO complicated and confusing. However, our attorneys experience in preparing QDROs means that we can help you put the divorce decree into action and help minimize the cost to you. Contact Burton Attorneys at Law to discuss your retirement division today.