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Could a QDRO Help Divorcing Couples Split Their Retirement Accounts?

D'Angelo & Grabow, LLP April 9, 2020

Splitting marital assets comes with its own set of challenges. But dividing retirement accounts can be a big hurdle for couples, especially in a volatile market. These accounts make up a substantial portion of a couple’s net worth. And if they don’t divide it correctly, they could face significant tax penalties.

Since spouses are typically entitled to a percentage of the other’s retirement account, this could hurt both of them financially after their divorce gets finalized.

Moving and shifting retirement account assets can be difficult. But divorcing couples can do it and still avoid tax burdens by using a qualified domestic relations order (QDRO).

What Is It?

A QDRO is a specific court order that gives one spouse the right to the other’s retirement benefits. While it’s separate from a couple’s initial divorce agreement, the contents in both are often similar. Because these documents are so complex and sensitive, they’ll want an attorney who understands these orders to make sure it fulfills each of their wishes.

How Do I Get One?

In most cases, one spouse’s attorney will contact the retirement plan’s administrator to get things started. Here are the other steps they’ll have to take:

  • Have the attorney create a draft.

  • Approve and get approval of the draft from the other party.

  • Get signature from divorce court judge.

  • Obtain a certified copy of the draft.

  • Get final approval.

Spouses Deserve to Keep Their Hard-Earned Money

Divorce can take both an emotional and financial toll on any couple. And if they have a sizeable nest egg, both spouses will want to do everything in their power to protect it. But by making the right moves, couples can have a better chance of keeping their money, especially during these tumultuous times.