It is important to always be prepared in life, no matter what curve-ball it might throw your way. Sometimes, this might present itself in the form of a divorce, which can include child support and custody, division of joint assets, and especially divvying up retirement accounts. Retirement plan transfers are not often discussed, yet an equally important part of the division of marital property. The one vital, and not very talked about document, required for the distribution of the retirement accounts during a divorce is a QDRO.
QDRO is the abbreviation for a Qualified Domestic Relations Order. In simpler terms - it is a legal document to transfer retirement funds from one account into another, without penalizing the account holder with an excessive tax. The most likely time you will have to familiarize yourself with a QDRO is if you’re undergoing a divorce. In divorce proceedings there can be many joint assets that need allocating, including marital property, cars, boats, bank accounts, 401K - retirement accounts and more.
The QDRO allows for the full or partial transfer of retirement account benefits. It allows and recognizes the existence of an alternate payee and their right to receive the benefits without a taxable penalty. It is important to know the domestic relations order is a legal document and must be prepared by a legal professional. It can be a judgment, decree or order and may be issued by any state agency, either as a part of a divorce decree or a court-approved property settlement.
Since QDROs are most often a part of the divorce process they are issued as a part of a divorce decree. Do note: a qualifying domestic relations order in itself is not a divorce decree. The form is solely for the purpose of the transfer, full or partial, of the retirement benefit plans from one party to another. This can also include more than one retirement plan. There are specific requirements and qualifications that must be met when filing a QDRO as a part of a divorce. The biggest qualifying matter is the new, or alternate, payee of the benefits. The benefits can only be transferred to a spouse, a former spouse, or to a dependent. If dependents are minor, the benefits can go to a legal guardian or a parent. The transfer cannot occur if all of the mandated requirements are not met.
Another question that frequently arises with the creation of a QDRO, is can it be amended or modified after it has been issued? The answer typically is no. Unless the QDRO contradicts a settlement agreement completely, does not fully and correctly reflect a divorce decree, or in the case of a clerical error – it cannot be amended. The QDRO was created to assist people in the transfer of retirement-401K account funds without taking a massive tax hit for the transfers, in the event of an irretrievable breakdown of communication within a marriage.
If you have found yourself in a predicament potentially seeking a divorce or perhaps already in the middle of divorce proceedings you can reach out to our office and schedule an appointment with one of our highly skilled family law and divorce attorneys and learn more about how a QDRO might benefit your case! Whether you are needing legal assistance in a divorce, child custody and support, division of assets or a QDRO, our experienced family law and divorce attorneys will be glad to assist you in your legal matters. You can contact The Law Offices of Eugene Mogilevsky, LLC by submitting an online Contact From through our website at Contact Us | The Law Offices of Eugene Mogilevsky (egmlegal.com) or call our office directly at (317) 743-7958 and one of the receptionists will be happy to assist you in scheduling a consultation with a family law attorney!
Disclaimer: This blog post is for educational and informational purposes only and is not to be taken as legal advice in any capacity. Reading this blog does not constitute or establish an attorney-client relationship.