QDRO Dividing Retirement Plans During a Divorce

QDRO: Dividing Retirement Plans During a Divorce

Property division is one of the most critical and contentious parts of a divorce. The parties and their attorneys must first identify all assets and debts, then categorize them as marital property or separate property. Some assets might even be a little bit marital and a little bit separate. Investment and retirement accounts can be particularly difficult for people to split up. However, a QDRO takes care of the actual process of dividing retirement plans.

What is a QDRO?

QDRO (pronounced “qua-dro” or “cue-dro”) stands for qualified domestic relations order. A judge will issue this type of court order or decree during a divorce when the married couple needs to split up one or more retirement accounts. Without a valid QDRO, administrators of retirement plans generally cannot release funds to the non-accountholder.

Here’s an example of how a QDRO might work. Joe has $100,000 in a retirement fund. His ex-wife Maggie is entitled to half of the money. During his divorce, the judge issued a QDRO requiring the administrator to release $50,000 to Maggie. She might roll over the funds to another account or take a lump sum payment.

What happens when each spouse has retirement plans?

There are other important considerations with a QDRO. For example, both couples might have retirement plans. Each spouse might be entitled to half of the other party’s plan in a basic property division barring any exceptions. However, instead of each party handing half to the other party, they might total the accounts then disburse money to the party with the smaller retirement account.

So, in our example above, Joe has $100,000 in an account. But now we see that Maggie also has an account that is worth $25,000. Together, they have $125,000, and each should receive $62,500. Since Maggie’s account is smaller than Joe’s, she might get a QDRO giving her the difference between the accounts, which is $37,500.

Tax issues can be another concern. The party receiving the funds might be taxed and potentially penalized if the amount received is not rolled over into another qualifying retirement plan.

How do you get a QDRO in a California divorce?

California Family Courts offer a form that can be used to request a QDRO. However, the form is long and contains legal jargon, most of it in fine print. Unless you fully understand the California Family Code and federal laws like the Employment Retirement Income Security Act of 1974 (ERISA), it’s best to hire an attorney to handle dividing retirement plans.

It would be best if you had the advice of an experienced California divorce attorney because QDROs are more complicated than they appear. Using the wrong form or omitting important information can lead to delays in receiving the funds you deserve. In fact, people often overlook retirement benefits when dividing property during a divorce. Your lawyer can help you locate retirement plans and submit a QDRO if appropriate.

Talk with Us About Using a QDRO to Divide Retirement Plans

It’s absolutely critical to understand this about a QDRO – it’s not given to you automatically. You and your attorney will have to request it.

The attorneys at the Law Offices of Judy L. Burger are experienced at all phases of divorce, legal separation, and annulment. Call us at 415-293-8314 to schedule a private appointment or visit our website. We assist clients along California’s Northern to Southern Coast, including San Francisco, Beverly Hills, Marin, San Jose, Gold River, San Diego, Santa Barbara, Ventura/Oxnard, and surrounding communities.