Qualified Domestic Relations Orders
The process of ending a marriage is never easy. The emotional roller coaster that a family goes through is enough for anyone to deal with, but through all of that, the spouses are still required to jump through the legal hoops and ladders that comes with every divorce. Child support, alimony, and division of property are common issues that come to mind in contemplation of divorce but along with those should be what happens to rights in more obscure property interests such as retirement plans. For years, marital income is being placed into various retirement plans. Is it not only fair to get your share at the dissolution of a marriage? Well, a Qualified Domestic Relations Order (QDRO) allows you to do just that.
Now, what is a Qualified Domestic Relations Order?
Usually prepared as part of a divorce proceeding, Qualified Domestic Relations order, or QDRO, awards an alternate payee the right to the benefits of the participant of a retirement plan. Now, it is important to note that for a domestic relations order to be qualified, it must be accepted by the retirement plan. Regardless of that requirement, it is just as important and binding as any alimony or child support order. These are usually plans that are sponsored by an employer or private company.
Be sure to include these in your order!
A QDRO can contain a number of terms that vary from one order to the next. However, each order MUST contain a few provisions.
You must ensure that the retirement plan owner’s name and address are both listed in the order.
You must also ensure that whoever the alternate payee has listed their name and address.
The correct retirement plan name
Terms regarding how the payment is determined or calculated such as percentage, flat dollar amount, or a formula.
The number of payments in the order. This could include one lump sum payment, monthly payments, or any other agreed upon method.
When the payments will be made.
I need a QDRO drafted, what do I do?
Well, first you should be aware that QDROs are not neutral documents but advocating ones. There are various division methods and the construction of the document could drastically effect any future outcomes on any payments that may be received. Thus, it is very important to have a lawyer represent you during the divorce who are familiar with retirement plans so that all retirement benefits and entitlements are addressed in the divorce and these documents can
be properly drafted for you. It would even benefit you to have your representation draft the order if possible. Further, you should not hesitate to begin this process. Try to have the order entered with the judgement. While it is very helpful in the practical sense, it also ensures that you don’t miss any payments or other benefits such as survivor benefits after death down the road. It is important to note that while a QDRO can be drafted well after the judgment is made, you will not receive any missed payments, only those going forward. However, if that is not possible, a lawyer can help with other proceedings to receive any back payment of retirement plans. Finally, be aware that you can notify the retirement plan to receive any necessary information that you feel your spouse may be withholding. Spouses as alternate payees have a right to access information in regards to these benefits. If they are still being difficult, attorneys can require them to provide necessary information via subpoena for court order. Department of Labor laws.
The Employer sponsored retirement plan provides an sample QDRO, can’t I just use that?
Sure you can! Just remember what I said earlier about these not being neutral documents. By using these, the party benefiting the most may not be the plan spouse or the alternative payee spouse but the employer! QDROs drafted by employers may not adequately cover all available options and may just make their job easier in accepting or denying the order. After all, the difference between a qualified domestic relations order and a regular domestic relations order is that the former is approved by the plan. However, what a plan provided QDRO does do well is act as a template for your representation to draft a QDRO that benefits you. You can gather what terminology and aspects of the plan a provider wants to see to keep any draft from being rejected.
Qualified Domestic Relation Orders may seem like another hoop to jump through in this legal circus but trust me when I tell you that they should not be ignored. With proper planning, drafting, and communication, a qualified domestic relations order could be good for both the alternative payee spouse as well as the benefit plan spouse. A QDRO can keep one spouse from losing pension money down the road while it protects the other from further litigation down the road. While complicated, this can certainly streamline the divorce process. Just remember that the sooner you start the process, the easier it will be.