Longer marriages tend to result in more complicated property division proceedings. If you have stayed married for more than a decade, you may own real estate and financial investments together with your spouse while also mutually owing funds on a shared credit card and mortgage.
Some property is very easy to divide. You don’t have any interest in your ex’s collection of vintage wristwatches, although you may ask for your portion of the value of the watches acquired during the marriage. You can easily split a basic financial account in half, making the division quick and fair.
Retirement accounts are another matter. They are often only in one spouse’s name and pose of risk of financial losses if you withdraw money from them before you are allowed to do so. If you believe that a fair division of your marital property will necessitate a split of your retirement account, then you may need a Qualified Domestic Relations Order (QDRO).
What is a QDRO?
Acronyms like QDRO confuse many people, and the term qualified domestic relations order doesn’t really clarify what a QDRO actually does for a divorcing couple. The name doesn’t expose that this document has the power to divide retirement savings in tax-sheltered accounts like 401(k)s without incurring the taxes and penalties people typically pay for early withdrawals.
However, that is exactly what a QDRO can achieve. Following either the approval by the courts of a settlement agreement between the spouses or a judge issuing a property division order, one attorney involved in the divorce can draft a QDRO.
After the appropriate parties review and approve it, it can then go directly to the professional managing the retirement account. They will create a separate account and move a portion of the balance of the original into the new account opened in the name of the other spouse. When done properly, the creation and filing of a QDRO will protect you from fees that would further diminish your already compromised retirement savings.
Can you avoid a QDRO?
For many couples, a QDRO is typically the best solution if you need to actually divide the retirement account. If you can reasonably divide your property without splitting the account, then you may not need a QDRO. However, in scenarios where the direct division of retirement savings is the easiest or best solution, then a QDRO is almost always the best tool to use for that particular action.
Learning more about how to handle complex property division matters will help you prepare for litigation or negotiations in your divorce.
